Smith Distributors, Inc., supplies ice cream shops with various toppings for making sundaes. On
P 9-3 Gross profit method. Smith Distributors, Inc., supplies ice cream shops with various toppings for making sundaes. On
ANSWER KEY P 9-3 Gross profit method
P 9-3 Smith Distributors, Inc
Smith Distributors, Inc., supplies ice cream shops with various toppings for making sundaes. On November 17, 2011, a fire resulted in the loss of all of the toppings stored in one section of the warehouse. The company must provide its insurance company with an estimate of the amount of inventory lost. The following information is available from the company's accounting records:
Fruit Toppings Marshmallow Toppings Chocolate Toppings
Inventory, January 1, 2011 $20,000 $7000 3,000
Net purchases through now. 17 150,000 36,000 12,000
Net sales through Nov 17 200,000 55,000 20,000
Historical gross profit ratio 20% 30% 35%
Required:
Calculate the estimated cost of each of the toppings lost in the fire.
What factors could cause the estimates to be over-or understated?CLICK HERE FOR THE SOLUTION
