Whispering Company lost most of its inventory in a fire in December just before the year-end physical inventory was taken. Corporate records disclose the following. Inventory (beginning) $ 79,100 Sales revenue $422,000 Purchases 288,300 Sales returns 21,400 Purchase returns 27,900 Gross profit % based on net selling price 33 % Merchandise with a selling price of $29,400 remained undamaged after the fire, and damaged merchandise has a net realizable value of $8,700. The company does not carry fire insurance on its inventory. Compute the amount of inventory fire loss. (Do not use the retail inventory method.) Inventory fire loss $

$42,700

Explanation:

The calculation of the amount of inventory fire loss is shown below:-

Particulars                                               Amount

Opening inventory                                 $79,100

Purchases                     $288,300

Less:- Purchase returns $27,900       $260,400

Goods available                                   $339,500

Sales revenue               $422,000

Less- Sales returns      $21,400  

Net Sales                     $400,600

Less:- Gross profit      $132,198              $268,402

($400,600 × 33%)

Estimated ending inventory                  $71,098

Less:- Goods on hand-undamaged    $19,698

$29400 × (1 - 0.33)

Less:- Goods on hand-damaged         $8,700

Fire loss on inventory                           $42,700

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