Solution-Compute the cost of the inventory lost in the fire

Compute the cost of the inventory lost in the fire

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Reference no: EM132884064

Problem - Gross Profit Method: Estimation of Fire Loss - On January 20, 2020, Stewart Company's records revealed the following information:

Inventory, July 1, 2019 $55,300

Purchases, July 1, 2019-January 20, 2020 382,100

Sales, July 1, 2019-January 20, 2020 592,000

Purchases returns 10,400

Purchases discounts taken 6,800

Freight-in 3,500

Sales returns 6,600

A fire destroyed the entire inventory on January 20, 2020, except for purchases in transit, FOB shipping point of $6,000, and goods having a selling price of $4,700 that were salvaged from the fire. The salvaged goods had an estimated salvage value of $2,900. The average gross profit on net sales in previous periods was 40%.

Required -

1. Compute the cost of the inventory lost in the fire.

2. If a company discloses that it uses a periodic inventory system, what concerns might you have about its interim financial statements?

Reference no: EM132884064

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Compute the cost of the inventory lost in the fire

Reference no: EM132884064

Reference no: EM132884064

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