II. Teltru, Inc. designs and manufactures thermometers used in industrial businesses. A natural disaster occurred, inventory was completely ruined, and the companys computer system, including all account records, was destroyed.

Before the disaster recovery specialists clean the buildings, Tim Berger, the company controller, is trying to salvage whatever records he can to support an insurance claim for the destroyed inventory. He is standing in what is left of the accounting department with Bob Vachon, the cost accountant.

Bob asked Tim what he should be looking for.

Dont worry about beginning inventory numbers, responds Tim, well get them from last years annual report. We need first-quarter cost data.

I was working on the first-quarter results just before the storm hit, Bob says. Look, my reports still in my desk drawer. All I can make out is that for the first quarter, material purchases were $571,200 and direct labor, manufacturing overhead, and total manufacturing costs to account for were $606,000, $294,000, and $1,710,000, respectively. Wait! Cost of goods available for sale was $1,608,000.

Great, says Tim. I remember that sales for the period were approximately $2,040,000. Given our gross profit of 35%, thats all you should need.

Bob is not sure about that, but decides to see what he can do with this information. The beginning inventory numbers were:

Raw Materials, $135,600

Work-in-Process, $274,800

Finished Goods, $184,800

1. Prepare a schedule showing each inventory account and the increases and decreases to each account. Use it to determine the ending inventories of Raw Materials, Work-in-Process, and Finished Goods.

2. Itemize a list of the cost of inventory lost.