QUESTION 8

The Walker Products Company, a small manufacturing company, produces a highly flammable cleaning fluid. On May 31, 2007 the company had a fire which completely destroyed the processing building and the work in process inventory; some of the equipment was saved.After the-fire a physical inventory was taken. The raw materials were valued at $30,000, the finished goods at $60,000, and supplies at $5,000.

The inventories on January 1, 2007 consisted of the following:

Raw materials ...........................

$ 15,000

Work in process.........................

50,000

Finished goods...........................

70,000

Supplies..................................

2,000

Total.......................................

$137,000

A review of the accounts showed that the sales and gross profit for the last five years were:

Sales

Gross Profit

19A

$300,000

$ 86,200

19B

320,000

102,400

19C

330,000

108,900

19D

250,000

62,500

19E

280.000

84,000

1,480,000

444,000

The sales for the first five months of 19F were $150,000; raw materials purchases were $50,000; freight on purchases was $5,000; direct labor for the five months was $40,000. For the past five years, factory overhead was 50% of direct labor cost.

You are required to determine the value of the work in

Process inventory lost by Fire.