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Olin [163]
3 years ago
15

The inventory of Cullumber Company was destroyed by fire on March 1. From an examination of the accounting records, the followin

g data for the first 2 months of the year are obtained:
Sales Revenue $51,000.
Sales Returns and Allowances $1,100.
Purchases $31,000.
Freight-In $1,200, and Purchase Returns and Allowances $1,500.
Required:
Determine the merchandise lost by fire, assuming:
1. A beginning inventory of $20,000 and a gross profit rate of 40% on net sales.
2. A beginning inventory of $30,000 and a gross profit rate of 30% on net sales.
Business
1 answer:
maria [59]3 years ago
5 0

Answer:

a. Merchandise lost by fire value  = $20,760

b. Merchandise lost by fire value  = $25,770

Explanation:

Net sales = $51,000 - $1,100

= $49,900

Net purchase cost = $31,000 + 1,200 - $1,500

= $30,700

a. Gross profit = $49,900 × 40%

= $19,960

Cost of goods sold = $49,900 - $19,960

= $29,940

Cost of goods sold = beginning inventory + Purchases - ending inventory

= $29,940 = $20,000 + $30,700 -  ending inventory

Ending inventory = $20,760

Merchandise lost by fire value  = $20,760

b. Gross profit = $49,900 × 30%

= $14,970

Cost of goods sold = $49,900 - $14,970

= $34,930

Cost of goods sold = beginning inventory + Purchases - ending inventory

= $34,930 = $30,000 + $30,700 - ending inventory

ending inventory = $25,770

Merchandise lost by fire value  = $25,770

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Answer:

Required 1.

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Required 2.

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Explanation:

Allocation of the purchase cost must be made on the bases appraisal value.

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Buildings = $129,000 / $430,000 × $326,430

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Preparing closing entries, which involves journalizing and uploading the entries to the ledger, is the eighth phase in the accounting cycle. During closure, there are four entries. To the Income Summary account, the initial entry cancels revenue accounts.

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