Gross Profit Method On April 15, 2011, fire damaged the office and warehouse of Stanislaw Corporation. The only accounting record saved was the general ledger, from which the trial balance below was prepared. 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 $13,000: $5,700 paid to accounts payable as of March 31, $3,400 for April merchandise shipments, and $3,900 paid for other expenses. Deposits during the same period amounted to $12,950, which consisted of receipts on account from customers with the exception of a $950 refund from a vendor for merchandise returned in April.
3. Correspondence with suppliers revealed unrecorded obligations at April 15 of $15,600 for April merchandise shipments, including $2,300 for shipments in transit (f.o.b. shipping point) on that date.
4. Customers acknowledged indebtedness of $46,000 at April 15, 2011. It was also estimated that customers owed another $8,000 that will never be acknowledged or recovered. Of the acknowledged indebtedness, $600 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 ratio 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
2010 2009
Net sales $530,000 $390,000
Net purchases 280,000 235,000
Beginning inventory 50,000 66,000
Ending inventory 75,000 50,000
6. Inventory with a cost of $7,000 was salvaged and sold for $3,500. The balance of the inventory was a total loss. Prepare a schedule computing the amount of inventory fire loss. The supporting schedule of the computation of the gross profit should be in good form.
(AICPAadapted)