Problem 96 Martinez Company lost most of its inventory in a

Problem 9-6 Martinez Company lost most of its inventory in a fire in December just before the year-end physical inventory was taken. Corporate records disclose the following Inventory (beginning) 81,600 Sales revenue Purchases Purchase returns $410,400 20,700 287,000Sales returns 27,800 Gross profit % based on net selling price 33 % Merchandise with a selling price of $29,700 remained undamaged after the fire, and damaged merchandise has a net realizable value of $8,100. The company does not carry fire insurance on its inventory. Compute the amount of inventory fire loss. (Do not use the retail inventory method) Inventory fire loss Click if you would like to Show Work for this question: Open Show Work

Solution

Ans. Calculation of amount of inventory fire in loss: Particulars Amt.($) Amt.($) Beginning Inventory       81,600 Purchases     287,000     368,600 Purchase Return     (27,800) Total goods available     340,800 Sales     410,400 Sales Return     (20,700) Net Sales     389,700 Less: Gross profit (33% of 389,700) (128,601) Cost of goods sold     261,099 Estimated ending inventory (unadjusted for damage)       79,701 Less: Goods on hand - undamaged (at cost)                 29,700 x (1-33%) or 67%     (19,899) Less: Goods on hand - damaged (at net realizable value)       (8,100) Fire loss on Inventory       51,702