In: Accounting
Larkspur 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) | $ 80,000 | Sales revenue | $410,800 | ||||
Purchases | 295,700 | Sales returns | 21,200 | ||||
Purchase returns | 28,300 | Gross profit % based on net selling price | 38 | % |
Merchandise with a selling price of $30,600 remained undamaged
after the fire, and damaged merchandise has a net realizable value
of $8,300. 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 |
$ |
Calculate inventory fire loss
Beginning inventory | 80000 | |
Purchase | 295700 | |
Less: Purchase returns | -28300 | 267400 |
Cost of goods available for sale | 347400 | |
Cost of goods sold (389600*62%) | -241552 | |
Ending inventory | 105848 | |
NRV of undamaged inventory | -8300 | |
Inventory fire loss | 97548 |