Question

Exercise 9-17

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You are called by Tim Duncan of Teal Co. on July 16 and asked to prepare a claim for insurance as a result of a theft that took place the night before. You suggest that an inventory be taken immediately. The following data are available.

Inventory, July 1		$ 36,600
Purchases—goods placed in stock July 1–15		87,400
Sales revenue—goods delivered to customers (gross)		123,700
Sales returns—goods returned to stock		4,400

Your client reports that the goods on hand on July 16 cost $30,900, but you determine that this figure includes goods of $6,500 received on a consignment basis. Your past records show that sales are made at approximately 40% over cost. Duncan’s insurance covers only goods owned.

Compute the claim against the insurance company. (Round ratios for computational purposes to 2 decimal places, e.g. 78.73% and final answer to 0 decimal places, e.g. 28,987.)

Claim against the insurance company

$

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Answer 1

Solution:

Cost of goods sold during 01.07 to 15.07 = Net sales * 100/140

= ($123,700 - $4,400) * 100/140 = $85,214

Ending inventory on 15.07 before theft = Beginning inventory + Purchases - Cost of goods sold = $36,600 + $87,400 - $85,214 = $38,786

Therefore claim against insurance company = $38,786