On April 10, 2022, fire damaged the office and warehouse of Sheffield Company. Most of the accounting records were destroyed, but the following account balances were determined as of March 31, 2022: Inventory (January 1, 2022), $80,000; Net Sales (January 1–March 31, 2022), $180,000; Purchases (January 1–March 31, 2022), $94,000.
The company’s fiscal year ends on December 31. It uses a periodic inventory system.
From an analysis of the April bank statement, you discover cancelled checks of $4,200 for cash purchases during the period April 1–10. Deposits during the same period totaled $18,500. Of that amount, 60% were collections on accounts receivable, and the balance was cash sales.
Correspondence with the company’s principal suppliers revealed $12,400 of purchases on account from April 1 to April 10. Of that amount, $1,600 was for merchandise in transit on April 10 that was shipped FOB destination.
Correspondence with the company’s principal customers produced acknowledgments of credit sales totaling $37,000 from April 1 to April 10. It was estimated that an additional $5,600 of credit sales were made but confirmation had not been received from customers. There were no sales returns or sales discounts from April 1 to April 10.
Sheffield Company reached an agreement with the insurance company that its fire-loss claim should be based on the average of the gross profit rates for the preceding 2 years. The financial statements for 2021 and 2020 showed the following data.
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2021
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2020
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Net sales
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$630,000 |
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$390,000 |
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Cost of goods purchased
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383,400 |
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269,600 |
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Beginning inventory
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69,000 |
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41,000 |
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Ending inventory
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87,000 |
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61,000 |
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Inventory with a cost of $17,000 was salvaged from the fire.
Answer the following.