Question - Gross Profit Method
You are called by Kevin Garnett of Celtic Co. on July 16 and asked to prepare a claim for insurance as a result of a theft that took place the night before. You suggest that an inventory be taken immediately. The following data are available.
Inventory, July 1 $ 38,000
Purchases-goods placed in stock July 1-15 90,000
Sales-goods delivered to customers (gross) 116,000
Sales returns-goods returned to stock 4,000
Your client reports that the goods on hand on July 16 cost $30,500, but you determine that this figure includes goods of $6,000 received on a consignment basis. Your past records show that sales are made at approximately 25% over cost. Garnett's insurance covers only goods owned.
Instructions - Compute the claim against the insurance company.