On August 19, 2017, Enterprise Inc. (Enterprise) suffered a serious fire that destroyed its entire inventory of fine paper products. Enterprise uses a periodic inventory control system and as a result doesn't keep track of the amount of inventory that has been removed from inventory. Enterprise last counted its inventory on June 30, 2017, its year-end. At that time, there was $1,125,000 of inventory on hand.
Enterprise's records indicate that sales from July 1 to August 19, 2017 were $980,000 and that during that time additional inventory was purchased for $325,000. Enterprise's usual gross margin percentage on its fine paper is 35 percent.

Enterprise has insurance that covers it fully for losses suffered by fire, except for a $20,000 deductible. Prepare a report to Enterprise's management that computes the amount of the loss that should be claimed from the insurance company as a result of the fire. Explain any factors that management should be aware of that would change the amount of the claim.

  • CreatedFebruary 26, 2015
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