1. Gheorghe Moresan Lumber Company handles three principal lines of merchandise with these varying rates of gross profit on cost. Lumber 25% Millwork 30% Hardware and fittings 40% On August 18, a fire destroyed the office, lumber shed, and a considerable portion of the lumber stacked in the yard. To file a report of loss for insurance purposes, the company must know what the inventories were immediately preceding the fire. No detail or perpetual inventory records of any kind were maintained. The only pertinent information you are able to obtain are the following facts from the general ledger, which was kept in a fireproof vault and thus escaped destruction. Lumber Millwork Hardware $ 250,000 $90,000 $45,000 Purchases to Aug. 18, 2017 1,500,000 375,000 160,000 Inventory, Jan. 1, 2017 Sales revenue to Aug 19,2017 2,08000 53,000 210000 Instructions Submit your estimate of the inventory amounts immediately preceding the fire. 2. Prophet Company signed a long-term purchase contract to buy timber from the U.S. Forest Service at $300 per thousand board feet. Under these terms, Prophet must cut and pay $6,000,000 for this timber during the next year. Currently, the market value is $250 per thousand board feet. At this rate, the market price is $5,000,000. Jerry Herman, the controller, wants to recognize the loss in value on the year-end financial statements, but the financial vice president, Billie Hands, argues that the loss is temporary and should be ignored. Herman notes that market value has remained near $250 for many months, and he sees no sign of significant change. Instructions (a) What are the ethical issues, if any? (b) Is any particular stakeholder harmed by the financial vice president's decision? (c) What should the controller do? 3.Basewood Company is in the technology industry and has experienced strong growth. You are especially interested in how well they are managing their inventory balances. You have collected the following information for the current year Inventory beginning of the year: $1,026,000 Inventory end of year: $1,007,000 Total cost of goods sold, before any adjustments $11,776,000 The company values inventory at lower of cost or market (using LIFO). Instructions a) Compute Basewood's inventory turnover before any adjustment. b) Recompute the inventory turnover after adjusting Basewood's inventory information for the following items. a. During the year, Basewood recorded sales and cost of goods sold on $22,000 of units shipped to various wholesalers on consignment. At year-end, none of these units have been sold by wholesalers. b. Shipping contracts changed 2 months ago from fob shipping point to fob destination point. At the end of the year, $25,000 of products are en route to China and will not arrive until after financial statements are released. Current inventory balances do not reflect this change in policy c. At the end of the year, Basewood determined that a certain section of inventory with a historical cost of $112,000 has a replacement cost of $100,800, net realizable value of $101,000, and net realizable value less a normal profit margin of $90,400. There is no need to make a lower of cost or market adjustment to other inventory