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  • Apr 20, 2009, 02:21 AM
    sibu
    Inventory accounting - cost of inventory destroyed
    Please assist me with the following questions:

    Citi-Wholesalers marks its purchases up by 25%. Its inventory was insured against fire, the policy being subject to average.
    A fire took place on 30th October 2007 and all inventory was destroyed except for items which had cost $40 000 which were salvaged in good condition.

    The following information was obtained from the firm’s ledger:
    Inventory (1st March 2007) $ 192 000
    Purchases (1st March 2007 to 30th October 2007) $ 728 000
    Sales (1st March 2007 to 30th October 2007) $ 960 000
    The financial year ends on 28th February 2008.

    Required:
    4.1 Calculate the cost of inventory destroyed in the fire.
    4.2 Calculate the amount to be claimed from the insurance company.
  • Apr 20, 2009, 03:06 AM
    ROLCAM

    1)

    Opening Balance = $ 192,000
    Add Purchases **= $ 728,000
    ___________________________
    Sub Total *******=$ 920,000

    Less COST OF SALES
    75% of $ 960,000 = $ 720,000
    __________________________

    EST closing stock = $ 200,000

    ===========================

    4.1 Calculate the cost of inventory destroyed in the fire.
    ANSWER = $ 200,000 less $40,000 = $160,000
    ______________________________________

    4.2 Calculate the amount to be claimed from the insurance company.
    ANSWER = $ 200,000 less $40,000 = $160,000
    ______________________________________
  • Mar 5, 2011, 12:22 AM
    aki1973
    The Navarre Company had a fire on February 10,2011, that destroyed a major portion of its inventory. The salvaged accounting records contained the following information:
    Sales January 1 to Feb 10 $701,200
    Net merchandise purchased Jan. 1 to Feb. 10 364,800
    Income statment:
    Sales $6,400,450
    Cost of goods sold $5,521,150
    Balance sheet :
    Merchandise invetory $588,200
    Navarre was able to salvage inventory with a cost of $212,400
    Estimating Ending Inventory
    Gross Profit method

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