On December 5, 2017, a hurricane destroyed the merchandise inventory of the Miami Muffler Company. In a waterproof secure safe were the companys records with the following information
On December 5, 2017, a hurricane destroyed the merchandise inventory of the Miami Muffler Company. In a waterproof secure safe were the company's records with the following information: Miami Muffler Company Trial Balance September 30, 2017 Debit Credit Cash . .. $315,325 Accounts Receivable. . Inventory, December 31, 2016 -. . 129,226 36,888 Accumulated Depreciation . Accounts Payable to Suppliers. . . other cur rent Liabilities . . . . . Common Stock .. . Retained Earnings. . Sales... . Sales Returns and Allowances .. . $ 32,670 31, 908 2,000 60, 000 41, 482 1,246, 624 17,900 Purchase Returns and Allowances. . Sales and Administrative Expenses. Other General Expenses 3, 582 50,657 120,565 $1,418.266$1,.418.266 Note: The Company' s 12 month fiscal year ends December 31st Through correspondence with suppliers, customers, the bank, etc the following additional information has also been collected: 1. Correspondence with suppliers revealed unrecorded obligations at December 5th of $120, 734. These unrecorded liabilities pertained to shipments in October totaling $58, 365, shipments in November of $50,635, and $10,000 for shipments in transit on December 5th shipped FOB Destination and $1, 734 for shipments in transit FOB Shipping Point 2. Customers of the company have acknowledged indebtedness of $92, 650 as of December 5th. Based on no responses from several other customers, the company estimated that customers, who have not responded, owe approximately $9,350. Finally, based on past experience, it is estimated that 4.33% of accounts rece i vable will be uncollectible Addlitional Information Continues on the Next Page 3. Bank statements and the canceled checks enclosed with the statements for October, November and through December 5th revealed the following: October November December Disbursement Activity Payments on Accounts Payable Existing at September 30th $19, 650 $12,258 $ Payments for October Inventory Shipments 11,650 21,460 10, 695 Payments for November Inventory Shipments 25,870 4,732 Payments for December Inventory Shipments 12, 635 Deposit Activity Received on Account From Customers 18,125 14,330 2,224 Refund From Vendor For Merchandise Returned on November 30, 2017 *This refund was delayed until December 2, 2017 because the supplier had lost the claim submitted by Miami Muffler -- 3, 950* 4. The insurance company is proposing a settlement of the company's claim based on the overall gross profit for the most recent two fiscal years. Scheduled below is information obtained from prior financial statements covering 2016 and 2015: For The Years Ended December 31st 2016 2015 Sales Sales Returns and Allowances Beginning Inventory Purchases Purchase Returns and Allowances 1,235 Ending Inventory Required a. Determine the amount of inventory loss from the hurricane. b. Do you feel the insurance company' s approach is fair? Explain in detail with supporting calculations as you feel appropriate $671,108 5,761 57,569 319,968 $709,335 6,985 50,345 341,977 916 57,569 129,226
