This historic book may have numerous typos and missing text. Purchasers can download a free scanned copy of the original book (without typos) from the publisher. Not indexed. Not illustrated. 1918 edition. Excerpt: …virtually the owner of the goods. The amount of the inventory as ascertained is credited at end of the period to the Trading AcCOST VALUE OF GOODS DESTROYED BY FIRE. 109 count, from which the gross profit is finally ascertained. COST VALUE OF GOODS DESTEOYED BY FffiE. It is often found necessary to ascertain the value of goods destroyed by fire_in a concern, particularly where the entire merchandise is destroyed. Reference must be made to the Trading Account in the General Ledger. The inventory is approximately valued as follows: assume, as the following problem illustrates, that the inventory on hand at the beginning of the period amounted to $10,000, and that additional purchases of merchandise totaled $5, (00; assume also that the total amount of sales as shown by the Trading Account is $12?000. We will further assume that for the past three years there has been an average gross profit of 20wter ceflt. Then if the average percentage of gross profit for the past three years was 20 per cent., the cost of the goods sold must be 100 per cent, plus 20 per cent., which, divided into the total amount of sales, $12,000, will give $10,000 as that cost. The account or claim against the insurance company for the merchandise destroyed would be as follows: Inventory of goods Jan. 1, 190S 110,000.00 Purchase to date 5,000.00 $15,000.00 Amount of sales to date $12,000.00 $12,000.00-=-(100% + 20%) = cost of goods sold 10,000.00 Merchandise destroyed $5,000.00 The difference between the entire inventory at the beginning plus the purchases and the cost of goods sold, will give the value of the destroyed goods, which would be the amount of the claim against the insurance company. TRADING ACCOUNT. 1905. Jan. 1. Inventory.. $10,000.00 Feb. 26. Purchases. 5,000.00 Gro..
