Problem 9-07

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

SHEFFIELD CORPORATION MARCH 31, 2021
Cash	$21,180
Accounts receivable	38,980
Inventory, December 31, 2020	72,870
Land	36,180
Buildings	115,250
Accumulated depreciation		$44,388
Equipment	3,811
Accounts payable		24,794
Other accrued expenses		1,640
Common stock		103,800
Retained earnings		56,140
Sales revenue		139,600
Purchases	56,140
Miscellaneous expense	25,951
	$370,362	$370,362

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 115 totaled $12,870: $6,094 paid to accounts payable as of March 31, $3,328 for April merchandise shipments, and $3,886 paid for other expenses. Deposits during the same period amounted to $13,595, which consisted of receipts on account from customers with the exception of a $910 refund from a vendor for merchandise returned in April.

3.

Correspondence with suppliers revealed unrecorded obligations at April 15 of $16,205 for April merchandise shipments, including $2,509 for shipments in transit (f.o.b. destination) on that date.

4.

Customers acknowledged indebtedness of $47,910 at April 15, 2021. It was also estimated that customers owed another $8,340 that will never be acknowledged or recovered. Of the acknowledged indebtedness, $568 will probably be uncollectible.

5.

The companies insuring the inventory agreed that the corporations 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 corporations audited financial statements disclosed this information:

		Year Ended December 31
		2020		2019
Net sales		$547,260		$373,770
Net purchases		287,780		240,970
Beginning inventory		46,800		64,100
Ending inventory		72,870		46,800

6.

Inventory with a cost of $7,370 was salvaged and sold for $3,520. 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