Question \#5 On December 5, 2019, a hurricane destroyed the merchandise inventory of the Key West Music Company. In a waterproof secure safe were the company's records with the followind information: Through correspondence with suppliers, customers, the bank, etc. the following additional information has also been collected: 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 still in transit on December 5 th shipped FOB Destination, and also $1,734 for shipments still in transit FOB Shipping Point. 2. Customers of the company have acknowledged indebtedness of $94,950 as of December 5th. Based on no responses from several other customers, the company estimated that customers, who have not responded, owe approximately $12,650. Final1y, based on past experience, it is estimated that 2.25% of accounts receivable will be uncollectible. 3. Bank statements and the canceled checks enclosed with the statements for October, November and through December 5 th, Refund from Vendor For Merchandise Returned on August 31, 2019 *This refund was delayed until December 2, 2019 because the supplier had lost the claim submitted by Key West Music Company. 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 2018 and 2017: For The Years Ended 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. Question \#5 On December 5, 2019, a hurricane destroyed the merchandise inventory of the Kev West Music Comnany. In a watarnmaf comre 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 still in transit on December 5th shipped FOB Destination, and also $1,734 for shipments still in transit FOB Shipping Point. 2. Customers of the company have acknowledged indebtedness of $94,950 as of December 5th. Based on no responses from several other customers, the company estimated that customers, who have not responded, owe approximately $12,650. Final1y, bated on past experience, it is estimated that 2.25% of accounts receivable will be uncollectible. 3. Bank statements and the canceled checks enclosed with the statements for October, November and through December 5th, 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 2018 and 2017: For The Years Ended nonomhan 21 st 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
