Problem 9-7

On April 15, 2018, fire damaged the office and warehouse of Teal Corporation. The only accounting record saved was the general ledger, from which the balance sheet data below was prepared.

TEAL CORPORATION MARCH 31, 2018

Cash

$18,500

Accounts receivable

36,750

Inventory, December 31, 2017

73,410

Land

32,230

Buildings

120,360

Accumulated depreciation

$41,501

Equipment

3,318

Accounts payable

21,802

Other accrued expenses

21,295

Common stock

93,400

Retained earnings

54,010

Sales revenue

133,030

Purchases

54,010

Miscellaneous expense

26,460

$365,038

$365,038

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 $12,190: $5,893 paid to accounts payable as of March 31, $3,214 for April merchandise shipments, and $4,149 paid for other expenses. Deposits during the same period amounted to $12,983, which consisted of receipts on account from customers with the exception of a $975 refund from a vendor for merchandise returned in April.

3.

Correspondence with suppliers revealed unrecorded obligations at April 15 of $15,328 for April merchandise shipments, including $2,442 for shipments in transit (f.o.b. shipping point) on that date.

4.

Customers acknowledged indebtedness of $47,130 at April 15, 2018. It was also estimated that customers owed another $7,910 that will never be acknowledged or recovered. Of the acknowledged indebtedness, $626 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
		2017		2016
Net sales		$495,690		$422,830
Net purchases		299,340		254,900
Beginning inventory		53,400		65,300
Ending inventory		73,410		53,400

6.

Inventory with a cost of $6,500 was salvaged and sold for $3,420. 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