College Accounting, Chapters 1-27
23rd Edition
ISBN: 9781337794756
Author: HEINTZ, James A.
Publisher: Cengage Learning,
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 13, Problem 8SPA
To determine
Estimate the amount of merchandise inventory destroyed in the fire on August 5 using the gross profit method.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
On February 7 of the following year,the merchandise inventory was destroyed by fire based on the following data obtained from the accounting records,estimate the cost of the merchandise destroyed:
Jan 1 merchandise inventory 140,600
Jan 1-Feb 7 purchase (net) 38,000
Jan 1-Feb sales (net)........68,000
Estimated gross profit rate ....40%
Gross Profit Method
A fire completely destroyed all the inventory of Glisan Lumber Yard on August 5, 20--. Fortunately, the accounting records were not destroyed in the fire. The following information is provided by Glisan Lumber Yard for the time period January 1 through August 5:
Beginning inventory, January 1, 20--
$98,000
Net purchases, January 1 through August 5
426,000
Net sales, January 1 through August 5
721,000
Normal gross profit as a percentage of sales
40%
Required:
Estimate the amount of merchandise inventory destroyed in the fire on August 5 using the gross profit method
$_____
Gross Profit Method
The merchandise inventory was destroyed by fire on December 13. The following data were obtained from the accounting records:
Jan. 1
Merchandise inventory
$350,000
Jan. 1-Dec. 31
Purchases (net)
2,950,000
Sales (net)
4.440,000
Estimated gross profit rate
35%
a. Estimate the cost of the merchandise destroyed.
Cost of the Merchandise Destroyed
$
$
b. Briefly describe the situations in which the gross profit method is useful.
1. The gross profit method is useful for estimating inventories for monthly or quarterly financial statements.
2. It is useful in estimating the cost of merchandise destroyed by fire or other disasters.
3. It is useful in reducing the carrying cost of inventory.
4. It is useful in achieving a higher net income.
Chapter 13 Solutions
College Accounting, Chapters 1-27
Ch. 13 - An overstatement of ending inventory in the year...Ch. 13 - An understatement of ending inventory in the year...Ch. 13 - LO2 Under the perpetual system of accounting for...Ch. 13 - LO3 A fiscal year that starts and ends at the time...Ch. 13 - LO3 If goods are shipped FOB shipping point, the...Ch. 13 - An understatement of ending inventory in the year...Ch. 13 - Prob. 2MCCh. 13 - In rimes of rising prices, the inventory cost...Ch. 13 - In rimes of rising prices, the inventory cost...Ch. 13 - In the application of lower-of-cost-or-market,...
Ch. 13 - LO1 If the ending inventory is overstated by...Ch. 13 - Using the following information, compute the...Ch. 13 - Use the following information to compute cost of...Ch. 13 - Kulsrud Company would like to estimate the current...Ch. 13 - What financial statements are affected by an error...Ch. 13 - What is the main difference between the periodic...Ch. 13 - Is a physical inventory necessary under the...Ch. 13 - Is a physical inventory necessary under the...Ch. 13 - In a period of rising prices, which inventory...Ch. 13 - What two factors are taken into account by the...Ch. 13 - Which inventory method always follows the actual...Ch. 13 - When lower-of-cost-or-market is assigned to the...Ch. 13 - List the three steps followed under the gross...Ch. 13 - List the five steps followed under the retail...Ch. 13 - INVENTORY ERRORS Assume that in year 1, the ending...Ch. 13 - JOURNAL ENTRIESPERIODIC INVENTORY Paul Nasipak...Ch. 13 - JOURNAL ENTRIESPERPETUAL INVENTORY Joan Ziemba...Ch. 13 - ENDING INVENTORY COSTS Sandy Chen owns a small...Ch. 13 - LOWER-OF-COST-OR-MARKET Stalberg Companys...Ch. 13 - SPECIFIC IDENTIFICATION, FIFO, LIFO, AND...Ch. 13 - COST ALLOCATION AND LOWER-OF-COST-OR-MARKET...Ch. 13 - Prob. 8SPACh. 13 - RETAIL INVENTORY METHOD The following information...Ch. 13 - INVENTORY ERRORS Assume that in year 1, the ending...Ch. 13 - JOURNAL ENTRIESPERIODIC INVENTORY Amy Douglas owns...Ch. 13 - JOURNAL ENTRIESPERPETUAL INVENTORY Doreen Woods...Ch. 13 - ENDING INVENTORY COSTS Danny Steele owns a small...Ch. 13 - LOWER-OF-COST-OR-MARKET Bouie Companys beginning...Ch. 13 - SPECIFIC IDENTIFICATION, FIFO, LIFO, AND...Ch. 13 - COST ALLOCATION AND LOWER-OF-COST-OR-MARKET Hall...Ch. 13 - GROSS PROFIT METHOD A flood completely destroyed...Ch. 13 - RETAIL INVENTORY METHOD The following information...Ch. 13 - Hurst Companys beginning inventory and purchases...Ch. 13 - Bhushan Company has been using LIFO for inventory...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- A fire completely destroyed all the inventory of Glisan Lumber Yard on August 5, 20--. Fortunately, the accounting records were not destroyed in the fire. The following information is provided by Glisan Lumber Yard for the time period January 1 through August 5: Beginning inventory, January 1, 20-- $100,000 Net purchases, January 1 through August 5 420,000 Net sales, January 1 through August 5 732,000 Normal gross profit as a percentage of sales 40% Required: Estimate the amount of merchandise inventory destroyed in the fire on August 5 using the gross profit method.arrow_forwardSarasota Lumber Company handles three principal lines of merchandise with these varying rates of gross profit on cost. Lumber Millwork Hardware and fittings 25% 30% 40% On August 18, a fire destroyed the office, lumber shed, and a considerable portion of the lumber stacked in the yard. To file a report of loss for insurance purposes, the company must know what the inventories were immediately preceding the fire. No detail or perpetual inventory records of any kind were maintained. The only pertinent information you are able to obtain are the following facts from the general ledger, which was kept in a fireproof vault and thus escaped destruction. Inventory $ Inventory, Jan. 1, 2025 Purchases to Aug. 18, 2025 Sales revenue to Aug. 18, 2025 Lumber Lumber $247,600 1,521,600 2,111,100 Millwork $88,900 372,700 483,600 Hardware $45,700 Submit your estimate of the inventory amounts immediately preceding the fire. (Round ratios for computational purposes to 5 decimal places, e.g. 78.74265% and…arrow_forwardGross Profit Method The inventory was destroyed by fire on December 31. The following data were obtained from the accounting records: Jan. 1 Inventory $350,000 Jan. 1 - Dec. 31 Purchases (net) 2,950,000 Sales 4,440,000 Estimated gross profit rate 35% a. Estimate the cost of the inventory destroyed. Estimated Cost of Merchandise Destroyed $ $ $ $ b. Which method is used to estimate inventory cost in case of inventory destroyed by fire?arrow_forward
- Gheorghe Moresan Lumber Company handles three principal lines of merchandise with these varying rates of gross profit on cost. Lumber 25% Millwork 30% Hardware and fittings 40% On August 18, a fire destroyed the office, lumber shed, and a considerable portion of the lumber stacked in the yard. To file a report of loss for insurance purposes, the company must know what the inventories were immediately preceding the fire. No detail or perpetual inventory records of any kind were maintained. The only pertinent information you are able to obtain are the following facts from the general ledger, which was kept in a fireproof vault and thus escaped destruction. 0 Lumber0 Millwork Hardware Inventory, Jan. 1, 2020 $0250,000 $090,000 $045,000 Purchases to Aug. 18, 2020 1,500,000 375,000 160,000 Sales revenue to Aug. 18, 2020 2,080,000 533,000 210,000 Instructions Submit your estimate of the inventory amounts immediately preceding the…arrow_forwardOn June 13, 20X8, a fire completely destroyed all the inventory of Salmon Lumber Company. Fortunately, the books were not destroyed in the fire. The following information is taken from the books of Salmon Lumber Company for the period January 1, 20X8 through June 13, 20X8. Beginning Inventory, January 1, 20X8 Net Purchases, January 1 through June 13, 20X8 Net Sales, January 1 through June 13, 20X8 Normal gross profit percentage of sales $450,000 $200,000 $350,000 40% The estimated merchandise inventory destroyed in the fire on June 13, 2014, using the gross profit method is: Select one: O a. $210,000 O b. $250,000 O c. $440,000 O d. $240,000arrow_forwardGross Profit Method A flood completely destroyed all the inventory of Bayside Waterworks Company on July 1, 20--. Fortunately, the accounting records were not destroyed in the flood. The following information is provided by Bayside Waterworks for the time period January 1 through July 1, 20--: Beginning inventory, January 1, 20-- $60,000 Net purchases, January 1 through July 1 380,000 Net sales, January 1 through July 1 650,000 Normal gross profit as a percentage of sales 45% Required: Estimate the amount of merchandise inventory destroyed in the flood on July 1 using the gross profit method.$fill in the blank 1arrow_forward
- On June 13, 20X8, a fire completely destroyed all the inventory of Salmon Lumber Company. Fortunately, the books were not destroyed in the fire. The following information is taken from the books of Salmon Lumber Company for the period January 1, 20X8 through June 13, 20X8. Beginning Inventory, January 1, 20X8 Net Purchases, January 1 through June 13, 20X8 Net Sales, January 1 through June 13, 20X8 Normal gross profit percentage of sales $450,000 $200,000 $350,000 40% The estimated merchandise inventory destroyed in the fire on June 13, 2014, using the gross profit method is:arrow_forwardOn June 29, 20x1, a fire damaged the warehouse and factory of an entity completely destroying the unisured merchandise inventory. The following data are available: Inventory, January 1 Purchases, January 1 – June 29 Sales, January 1 – June 29 Markup based on cost 60,000 580,000 770,000 25% How much is the estimated inventory fire loss?arrow_forwardGross Profit Method A flood completely destroyed all the inventory of Bayside Waterworks Company on July 1, 20--. Fortunately, the accounting records were not destroyed in the flood. The following information is provided by Bayside Waterworks for the time period January 1 through July 1, 20--: Beginning inventory, January 1, 20-- $60,000 Net purchases, January 1 through July 1 380,000 Net sales, January 1 through July 1 650,000 Normal gross profit as a percentage of sales 45% Required: Estimate the amount of merchandise inventory destroyed in the flood on July 1 using the gross profit method.arrow_forward
- A flood destroyed a company's warehouse contents on September 12. The following information was the only information that was salvaged: 1. Inventory, beginning: $28,200 2. Purchases for the period: $17,200 3. Sales for the period: $55,200 4. Sales returns for the period: $720 The company's average gross profit ratio is 37%. What is the estimated cost of the lost inventory using the gross profit method? Multiple Choice $11,077.60. $25,242.40. $28,602.00. $45,400.00. $44,400.00.arrow_forwardOn April 15 of the current year, a fire destroyed the entire uninsured inventory of a retail store. The following data are available: Sales, January 1 through April 15 $573000 Inventory, January 1 91000 Purchases, January 1 through April 15 477500 20% Markup on cost The amount of the inventory loss is estimated to be • $91000. O $109200. O $95500. O $45500.arrow_forwardThe merchandise inventory was destroyed by fire on December 13. The following data were obtained from the accounting records: Merchandise inventory $ 350,000 Jan. 1 Jan. 1-Dec. 31 Purchases (net) 2,950,000 Sales 4,440,000 Estimated gross profit rate 35% a. Estimate the cost of the merchandise destroyed. b. Briefly describe the situations in which the gross profit method is useful.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
Century 21 Accounting Multicolumn JournalAccountingISBN:9781337679503Author:GilbertsonPublisher:Cengage
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning
Century 21 Accounting Multicolumn Journal
Accounting
ISBN:9781337679503
Author:Gilbertson
Publisher:Cengage