Question

You are called by Tim Duncan of Waterway Co. on July 16 and asked to prepare a claim for insurance as a result of a theft that took place the night before. You suggest that an inventory be taken immediately. The following data are available. Inventory, July 1 $ 38,200 Purchases—goods placed in stock July 1–15 80,300 Sales revenue—goods delivered to customers (gross) 124,800 Sales returns—goods returned to stock 4,400 Your client reports that the goods on hand on July 16 cost $29,400, but you determine that this figure includes goods of $5,500 received on a consignment basis. Your past records show that sales are made at approximately 30% over cost. Duncan’s insurance covers only goods owned. Compute the claim against the insurance company. (Round ratios for computational purposes to 2 decimal places, e.g. 78.73% and final answer to 0 decimal places, e.g. 28,987.)

Answer 1

1. Cost of Goods Sold = (Sales - Sales Return) / 130%

Cost of Goods Sold = (124800 - 4400) / 130%

Cost of Goods Sold = $92615.38

2. Closing inventory = Opening Inventory + Purchases - COGS

Closing inventory = 38200 + 80300 - 92615.38

Closing inventory = $25884.62

3. Physical Ivnentory at the comapny = $29400 - 5500 = $23900 (Company doesn't have ownership over consignment goods)

4. The claim against the insurance company = $25884.62 - $23900

The claim against the insurance company = $1985