Problem 9-07

On April 15, 2021, fire damaged the office and warehouse of Stellar Corporation. The only accounting record saved was the general ledger, from which the balance sheet data below was prepared.

STELLAR CORPORATION

MARCH 31, 2021

Cash

$20,350

Accounts receivable

43,510

Inventory, December 31, 2020

70,640

Land

36,030

Buildings

100,490

Accumulated depreciation

$39,418

Equipment

3,629

Accounts payable

22,911

Other accrued expenses

7,924

Common stock

102,400

Retained earnings

53,600

Sales revenue

130,430

Purchases

53,600

Miscellaneous expense

28,434

$356,683

$356,683

The following data and information have been gathered.

1. The fiscal year of the corporation ends on December 31.

2. An examination of the April bank statement and canceled checks revealed that checks written during the period April 1-15 totaled $12,020: $5,478 paid to accounts payable as of March 31, $3,397 for April merchandise shipments, and $3,818 paid for other expenses. Deposits during the same period amounted to $14,144, which consisted of receipts on account from customers with the exception of a $905 refund from a vendor for merchandise returned in April.

3. Correspondence with suppliers revealed unrecorded obligations at April 15 of $16,813 for April merchandise shipments, including $2,197 for shipments in transit (f.o.b. destination) on that date.

4. Customers acknowledged indebtedness of $47,340 at April 15, 2021. It was also estimated that customers owed another $8,060 that will never be acknowledged or recovered. Of the acknowledged indebtedness, $580 will probably be uncollectible.

5. The companies insuring the inventory agreed that the corporation's fire-loss claim should be based on the assumption that the overall gross profit rate for the past 2 years was in effect during the current year. The corporation's audited financial statements disclosed this information:

Year Ended

December 31

2020

2019

Net sales $576,880 $363,210

Net purchases 276,840 223,380

Beginning inventory 49,500 72,130

Ending inventory 70,640 49,500

6. Inventory with a cost of $6,890 was salvaged and sold for $3,540. The balance of the inventory was a total loss.

Compute the amount of inventory fire loss. (Round ratios for computational purposes to 2 decimal places, e.g 78.52% and final answer to 0 decimal places, e.g. 28,987.)

Inventory fire loss

$