Question

You are called by Tim Duncan of Spurs 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 $41,010
Purchases-goods placed in stock July 1-15 90,490
Sales revenue-goods delivered to customers (gross) $119,400
Sales returns-goods returned to stock $3,960
Your client reports that the goods on hand on July 16 cost $33,210, but you determine that this figure includes goods of $7,170 received on a consignment basis. Your past records show that sales are made at approximately 40% over cost. Duncan's insurance covers only goods owned.
Compute the claim against the insurance company.

Answer 1

Answer:

$23,003

Explanation:

Computation for the claim against the insurance company.

Using this formula

Claim against insurance company = Total cost of goods available for sales - Cost of goods sold - Owned inventory on hand on July 16

Let plug in the formula

Claim against insurance company= ($41,010 + 90,490) - [($119,400 - $3,960)*100/140)] - ($33,210- $7,170)

Claim against insurance company= $131,500 - $82,457 - $26,040

Claim against insurance company= $23,003

Therefore the claim against the insurance company is $23,003