1. On October 1, 20×1, the warehouse of ABC Co. and all the inventories contained therein were razed
by fire. Off-site back up of data base shows the following information:
Inventory, Jan. 1 20,000
Net purchases 190,000
Net sales from Jan. to Sept. 240,000
Gross profit rate based on cost 25%
Twenty percent of the inventory contained in the warehouse has been salvaged from the fire, while half
is partially damaged and can be sold as scrap at thirty percent of its cost. How much is the inventory loss
due to the fire?
a. 18,000 b. 5,400 c. 9,000 d. 11,700
2. The work in process inventories of ABC Manufacturing, Inc. were completely destroyed by fire on
June 1, 20×1. Amounts for the following accounts have been established.
January 1, 20×1 June 1, 20x1
Accounts payable 117,000 135,000
Raw materials 15,000 18,000
Work in process 60,000 ?
Finished goods 69,000 87,000
The following additional information was determined:
• Payments to suppliers for purchases on account, ₱60,000.
• Freight on purchases, ₱3,000.
• Purchase returns, ₱7,500.
• Direct labor, ₱48,000.
• Production overhead, ₱18,000.
• Sales from January 1 to May 31, ₱225,000.
• Sales returns, ₱45,000.
• Sales discounts, ₱15,000.
• Gross profit rate based on sales, 25%.
How much is the work in process destroyed by fire?
a. 48,000 b. 49,500 c. 58,500 d. 51,000
Use the following information for the next two questions:
Presented below is information pertaining to ABC Co.:
Cost
Retail
Inventory, January 1
21,750
35,000
Purchases
138,250
200,750
Freight-In
5,000
–
Purchase discounts
1,250
–
Purchase returns
13,000
21,500
Departmental Transfers-In (Debit)
2,500
3,750
Departmental Transfers-Out (Credit)
2,000
3,000
Markups
15,000
Markup cancellations
5,000
Markdowns
30,000
Markdown cancellations
7,500
Abnormal spoilage (theft and casualty loss)
12,500
17,500
Sales
109,500
Sales returns
6,250
Sales discounts
2,500
Employee discounts
1,250
Normal spoilage (shrinkage and breakages)
500
