On December 19, 2022, a major flood destroyed the merchandise inventory of the Solid Glass Door...

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On December 19, 2022, a major flood destroyed the merchandise inventory of the Solid Glass Door Company. In a waterproof secure safe were the company's records with the following information: Solid Glass Door Company Trial Balance September 30, 2022 Cash . . . Debit $315,325 Credit Accounts Receivable. 36,888 Inventory, December 31, 2021 129,226 Equipment. . . . Accumulated Depreciation Accounts Payable to Suppliers. Other Current Liabilities. Retained Earnings. Sales. 200,775 $ 32,670 31,908 Common Stock 2,000 60,000 41,482 . . 1,246,624 Sales Returns and Allowances 17,900 Purchases. 546,930 Purchase Returns and Allowances.. 3,582 Sales and Administrative Expenses. Other General Expenses 50,657 120,565 $1,418,266 $1,418,266 Note: The Company's 12 month fiscal year ends December 31st. Through correspondence with suppliers, customers, the bank, etc. the following additional information has also been collected: a. Correspondence with suppliers revealed unrecorded obligations at December 19th of $120,734. These unrecorded liabilities pertained to shipments in October totaling $58,365, shipments in November of $50,635, and $10,000 for shipments still in transit on December 19th shipped FOB Destination, and also $1,734 for shipments still in transit FOB Shipping Point. b. Customers of the company have acknowledged indebtedness of $94,950 as of December 19th. Based on no responses from several other customers, the company estimated that customers, who have not responded, owe approximately $12,650. Finally, based on past experience, it is estimated that 2.25% of accounts receivable will be uncollectible. c. Bank statements and the canceled checks enclosed with the statements for October, November and through December 19th, revealed the following: Disbursement Activity Payments on Accounts Payable Existing at September 30th October November December $19,650 $12,258 $ Payments for October Inventory Shipments Payments for November Inventory Shipments Payments for December Inventory Shipments Deposit Activity Received on Account From Customers Refund from Vendor For Merchandise Returned on August 31, 2022 11,650 21,460 10,695 25,870 4,732 12,635 18,125 14,330 2,224 3,950* *This refund was delayed until December 14, 2022 because the supplier lost the claim submitted by Solid Glass Door Company. d. The insurance company is proposing a settlement of the company's claim based on the overall gross profit for the most recent two fiscal years. Scheduled below is information obtained from prior financial statements covering 2021 and 2020: For The Years Ended Sales Sales Returns and Allowances 2021 $671, 108 5,761 Beginning Inventory 57,569 Purchases 319,968 Purchase Returns and Allowances 1,235 Ending Inventory 129,226 Required December 31st 2020 $709,335 6,985 50,345 341,977 916 57,569 1. Prepare a schedule to determine the amount of inventory loss from the flood. 2. Do you feel the insurance company's approach is fair? Explain in detail with supporting calculations. On December 19, 2022, a major flood destroyed the merchandise inventory of the Solid Glass Door Company. In a waterproof secure safe were the company's records with the following information: Solid Glass Door Company Trial Balance September 30, 2022 Cash . . . Debit $315,325 Credit Accounts Receivable. 36,888 Inventory, December 31, 2021 129,226 Equipment. . . . Accumulated Depreciation Accounts Payable to Suppliers. Other Current Liabilities. Retained Earnings. Sales. 200,775 $ 32,670 31,908 Common Stock 2,000 60,000 41,482 . . 1,246,624 Sales Returns and Allowances 17,900 Purchases. 546,930 Purchase Returns and Allowances.. 3,582 Sales and Administrative Expenses. Other General Expenses 50,657 120,565 $1,418,266 $1,418,266 Note: The Company's 12 month fiscal year ends December 31st. Through correspondence with suppliers, customers, the bank, etc. the following additional information has also been collected: a. Correspondence with suppliers revealed unrecorded obligations at December 19th of $120,734. These unrecorded liabilities pertained to shipments in October totaling $58,365, shipments in November of $50,635, and $10,000 for shipments still in transit on December 19th shipped FOB Destination, and also $1,734 for shipments still in transit FOB Shipping Point. b. Customers of the company have acknowledged indebtedness of $94,950 as of December 19th. Based on no responses from several other customers, the company estimated that customers, who have not responded, owe approximately $12,650. Finally, based on past experience, it is estimated that 2.25% of accounts receivable will be uncollectible. c. Bank statements and the canceled checks enclosed with the statements for October, November and through December 19th, revealed the following: Disbursement Activity Payments on Accounts Payable Existing at September 30th October November December $19,650 $12,258 $ Payments for October Inventory Shipments Payments for November Inventory Shipments Payments for December Inventory Shipments Deposit Activity Received on Account From Customers Refund from Vendor For Merchandise Returned on August 31, 2022 11,650 21,460 10,695 25,870 4,732 12,635 18,125 14,330 2,224 3,950* *This refund was delayed until December 14, 2022 because the supplier lost the claim submitted by Solid Glass Door Company. d. The insurance company is proposing a settlement of the company's claim based on the overall gross profit for the most recent two fiscal years. Scheduled below is information obtained from prior financial statements covering 2021 and 2020: For The Years Ended Sales Sales Returns and Allowances 2021 $671, 108 5,761 Beginning Inventory 57,569 Purchases 319,968 Purchase Returns and Allowances 1,235 Ending Inventory 129,226 Required December 31st 2020 $709,335 6,985 50,345 341,977 916 57,569 1. Prepare a schedule to determine the amount of inventory loss from the flood. 2. Do you feel the insurance company's approach is fair? Explain in detail with supporting calculations.

Answer rating: 100% (QA)

1 Inventory Loss from Flood To determine the inventory loss from the flood we need to reconstruct the inventory balance at December 19th 2022 Heres the schedule Inventory Reconstruction Description Am... View the full answer