Larkspur Company lost most of its inventory in a fire in December just before the year-end...

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

$

Expert Solution

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

ekkarill92 answered 3 years ago

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