Robo Ltd.

On April 10, 2016, fire destroyed the office and warehouse of Robo, Ltd. Most of the accounting records were destroyed, but the following account balances were determined as at 31 March 2016. Inventory, 1 January 2016, P80,000; Sales (1 January 31 March 2016), P180,000; Purchases (1 January 31 March 2016), P94,000. The companys financial year ends on 31 December. It uses a periodic inventory system. From an analysis of the April bank statement, you discover cancelled cheques of P4,200 for cash purchases during the period 1-10 April. Deposits during the same period totaled P18,500. Of that amount, 60% were collections on accounts receivable, and the balance was cash sales. Correspondence with the companys principal suppliers revealed P12,400 of purchases on account from 1 April to 10 April. Of that amount, P1,600 was for inventory in transit on 10 April that was shipped FOB destination. Correspondence with the companys principal customers produced acknowledgments of credit sales totaling P28,000 from 1 April to 10 April. It was estimated that P5,100 of credit sales will never be acknowledged or recovered from customers. Robo Ltd. Reached an agreement with the insurance company that its fire loss claim should be based on the average of the gross profit ratios for the preceding 2 years. The financial statements for 2015 and 2014 showed the following data.

Robo Ltd. Reached an agreement with the insurance company that its fire loss claim should be based on the average of the gross profit ratios for the preceding 2 years. The financial statements for 2015 and 2014 showed the following data. 2015 2014 P600,000 P480,000 Net Sales 416,000 356,000 Cost of goods purchased Beginning inventory 60,000 40,000 80,000 Ending inventory 60,000 Inventory with cost of P17,000 was salvaged from the fire. Instructions: Use Case Analysis format in answering the following: a. Determine the balances in (1) Sales and C2) Purchases as at 10 April. b. Determine the average profit rate for the years 2014 and 2015. (Hint: Find the gross profit ratio for each year and divide the sum by 2). c. Determine the inventory loss as a result of the fire, using the gross profit method