Cullumber Company lost most of its inventory in a fire in December just before t

Question

Cullumber 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 $179,500 Sales revenue $640,200 Purchases for the year 402,500 Sales returns 25,800 Purchase returns 31,500 Rate of gross profit on net sales 20 % Merchandise with a selling price of $21,200 remained undamaged after the fire. Damaged merchandise with an original selling price of $15,800 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.

Explanation / Answer

Beginning Inventory 179500 Purchases 402500 Less Purchase returns -31500 371000 Goods available for sale 550500 Net sales 614400 Less: Gross profit on sales 122880 Cost of goods sold 491520 Estimated Ending Inventory 58980 Less undamaged goods at cost 16960 =21200*0.8 less salvage value of damaged goods 5700 Amount of the loss 36320

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