Exercise 9-13

Tim Legler requires an estimate of the cost of goods lost by fire on March 9. Merchandise on hand on January 1 was $38,850. Purchases since January 1 were $92,740; freight-in, $4,800; purchase returns and allowances, $2,200. Sales are made at 33 ¹/₃% above cost and totaled $132,600 to March 9. Goods costing $11,830 were left undamaged by the fire; remaining goods were destroyed. (a) Compute the cost of goods destroyed.

Cost of goods destroyed

$

(b) Compute the cost of goods destroyed, assuming that the gross profit is 33 ¹/₃% of sales. (Round ratios for computational purposes to 5 decimal places, e.g. 78.72345% and final answer to 0 decimal places, e.g. 28,987.)

Cost of goods destroyed

$

Problem 9-9

Maddox Specialty Company, a division of Lost World Inc., manufactures three models of gear shift components for bicycles that are sold to bicycle manufacturers, retailers, and catalog outlets. Since beginning operations in 1990, Maddox has used normal absorption costing and has assumed a first-in, first-out cost flow in its perpetual inventory system. The balances of the inventory accounts at the end of Maddoxs fiscal year, November 30, 2014, are shown below. The inventories are stated at cost before any year-end adjustments.

Finished goods	$672,880
Work in process	126,200
Raw materials	274,400
Factory supplies	70,300

The following information relates to Maddoxs inventory and operations. 1. The finished goods inventory consists of the items analyzed below.

Cost	Market
Down tube shifter
Standard model	$ 69,100	$ 68,300
Click adjustment model	95,420	88,580
Deluxe model	112,800	110,100
Total down tube shifters	277,320	266,980
Bar end shifter
Standard model	83,190	93,640
Click adjustment model	108,700	107,100
Total bar end shifters	191,890	200,740
Head tube shifter
Standard model	79,070	78,600
Click adjustment model	124,600	126,500
Total head tube shifters	203,670	205,100
Total finished goods	$672,880	$672,820

2.	One-half of the head tube shifter finished goods inventory is held by catalog outlets on consignment.
3.	Three-quarters of the bar end shifter finished goods inventory has been pledged as collateral for a bank loan.
4.	One-half of the raw materials balance represents derailleurs acquired at a contracted price 20% above the current market price. The market value of the rest of the raw materials is $135,100.
5.	The total market value of the work in process inventory is $116,170.
6.	Included in the cost of factory supplies are obsolete items with an historical cost of $4,790. The market value of the remaining factory supplies is $66,900.
7.	Maddox applies the lower-of-cost-or-market method to each of the three types of shifters in finished goods inventory. For each of the other three inventory accounts, Maddox applies the lower-of-cost-or-market method to the total of each inventory account.
8.	Consider all amounts presented above to be material in relation to Maddoxs financial statements taken as a whole.

(a) Prepare the inventory section of Maddoxs balance sheet as of November 30, 2015. (Round answers to 0 decimal places, e.g. 2,550.)

Maddox Specialty Company Balance Sheet November 30, 2015
Current Assets Current Liabilities Intangible Assets Long-term Investments Long-term Liabilities Property, Plant and Equipment Stockholders' Equity Total Assets Total Current Assets Total Current Liabilities Total Intangible Assets Total Liabilities Total Liabilities and Stockholders' Equity Total Long-term Investments Total Long-term Liabilities Total Property, Plant and Equipment Total Stockholders' Equity
Work-in-Process Finished Goods Total Inventories Factory Supplies Raw Materials Inventory
Inventory Raw Materials Total Inventories Work-in-Process Factory Supplies Finished Goods	$
Factory Supplies Raw Materials Total Inventories Finished Goods Work-in-Process Inventory
Inventory Total Inventories Factory Supplies Finished Goods Raw Materials Work-in-Process
Work-in-Process Factory Supplies Inventory Finished Goods Raw Materials Total Inventories
Finished Goods Total Inventories Factory Supplies Inventory Work-in-Process Raw Materials	$