A fire destroyed all ABC's merchandise inventory on October 1. On January 1 the balance in inventory was: 3557. From January 1-October 1 sales were 17785 purchases were 16006.5 the mark up on cost was 32% The gross profit margin is ( as %6, e.g. 34.23% would entered as 34.23): Answer 1 Question 1 Estimated COGS of inventory sold: Answer 2 Question 1 Estimated inventory destroyed: Answer 3 Question 1

QUESTION 1 In its first year of business, Miss Take, the bookkeeper, erroneously recorded $10,000 of product costs as period costs. Sixty percent of the inventory has been sold. Which of the following are correct? (Select all that apply.) O Inventory is overstated by $4,000 Inventory is overstated by $6,000 Inventory is understated by $4,000 Inventory is understated by $6,000 O Cost of Goods Sold is overstated by $4,000 U Cost of Goods Sold is overstated by $6,000 Cost of Goods Sold is understated by $6,000 O Cost of Goods Sold is understated by $4,000 O O

Problems Problem 1 Gross Margin Method: Inventory Burned, Indemnity. Word Wholesale Company's warehouse burned on April 1, 20X5. The following information (up to the date of the fire) was taken from the records of the company; inventory, January 1, P30,0003; gross sales, P160,000; purchases, P90,000%3; sales returns (restored to stock), P5,000; purchase returns and allowances, P2,000; and freight-in, P8,000. The cost of goods sold and gross margin for the past three years were: Cost of Goods Sold P500,000 460,000 500,000 Gross Margin P125,000 120,000 120,000 Year 20X2 20X3 20X4 Required: 1. Estimate the cost of the inventory destroyed in the fire. 2. Under what conditions would your response to (1) above be questionable? 3. The insurance company pays indemnity on market value at the date of the fire. What amount would you recommend that Word submit as an insurance claim? Explain.

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