P 9-5 (gross profit method) On April 15, 2011, fire damaged the office and warehouse of Stanislaw Corporation.
P 9-5 (gross profit method) Stanislaw Corporation.
The only accounting record saved was the general ledger, from which the trial balance below was prepared.
Trial Balance March 31, 2011
Cash 20000 Accts Recv 40000 Inventory 12/31/07 75000 Land 35000 Building and Equip 110000 Accumulated depreciation 41300 Other assets 3600 Accts Payable 23700 Other expense accruals 10200 Capital stock 100000 Retained earnings 52000 Sales 135000 Purchases 52000 Other expenses 26600 Total 362200 362200
The following data and information have been gathered.
1. The fiscal year of the corporation ends on Dec 31.
2. An examination of the April bank statement and canceled checks revealed that checks written during the period April 1-15 totaled $13,000: $5,700 paid to accounts payable as of March 31, $3400 for April merchandise shipments, and $3900 paid for other expenses. Deposits during the same period amounted to $12,950, which consisted of receipts on account from customers with the exception of a $950 refund from a vendor for merchandise returned in April.
3. Correspondence with suppliers revealed unrecorded obligations at April 15 of $15,600 for April merchandise shipments, including $2300 for shipments in transit (f.o.b. shipping point) on that date. 4. Customers acknowledged indebtedness of $46,000 at April 15, 2011. It was also estimated that customers owed another $8000 that will never be acknowledged or recovered. Of the acknowledged indebtedness, $600 will probably be uncollectible.
5. The companies insuring the inventory agreed that the corporation's fire-loss claim should be based on the assumption that the overall gross profit ratio for the past 2 years was in effect during the current year.
The corporation's audited financial statements disclosed this information: Year Ended Dec 31, 2010 Net sales 530000 Net purchases 280000 Beginning inventory 50000 Ending inventory 75000 Year Ended Dec 31, 2009 Net sales 390000 Net purchases 235000 Beginning inventory 66000 Ending inventory 50000
6. Inventory with a cost of $7000 was salvaged and sold for $3500. The balance of the inventory was a total loss.
Instructions:
Prepare a schedule computing the amount of inventory fire loss. The supporting schedule of the computation of the gross profit should be in good form.
SOLUTION PREVIEW
File name:
P9-5-Stanislaw-Corporation.doc File type: application/msword Price:
$5
SOLUTION PREVIEW
Stanislaw Corporation
COMPUTATION OF INVENTORY FIRE LOSS
April 15, 2005
Inventory,
1/1/05
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$ 75,000
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||
Purchases,
1/1/ – 3/31/05
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52,000
|
||
April
merchandise shipments paid
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3,400
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||
Unrecorded
purchases on account
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10,600
|
||
Total
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141,000
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