Your answer is incorrect. Try again. Sunland Company lost most of its inventory

Question

Your answer is incorrect. Try again. Sunland Company lost most of its inventory in a fire in December just before the year-end physical inventory was taken. The corporation's books disclosed the following. Beginning inventory 83,100 Sales revenue Sales returns Rate of gross profit on net sales $633,100 25,900 Purchases for the year 419,600 Purchase returns 30,800 30% Merchandise with a selling price of $19,100 remained undamaged after the fire. Damaged merchandise with an original selling price of $14,400 had a net realizable value of $5,700. Compute the amount of the loss as a result of the fire, assuming that the corporation had no insurance coverage. Amount of the loss 4,380

Explanation / Answer

Ans. Amount of the loss 405970

Beginning inventory 183100 Purchases 419600 Less: Purchase returns -30800 Goods available for sale 571900 Sales 633100 Less: Sales returns -25900 Net sales 607200 Less: Gross Profit @30% -182160 Estimated ending inventory 425040 Less: Goods on hand (undamaged) -13370 Less: Goods on hand (damaged) -5700 Fire loss on inventory 405970 *Goods on hand (undamaged) Selling price * (1 - Gross Profit Rate) 19100 * (1 - 30%) 19100 * 0.7 13370 *Goods on hand (damaged) Net realizable value = 5700

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