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On June 30, 2016, a flash flood damaged the warehouse and factory of Padway Corporation, completely destroying the work-in-process inventory. There was no damage to either the raw materials or finishe

On June 30, 2016, a flash flood damaged the warehouse and factory of Padway Corporation, completely destroying the work-in-process inventory. There was no damage to either the raw materials or finished goods inventories. A physical inventory taken after the flood revealed the following valuations:

Raw materials $ 62,000
Work in process 0
Finished goods 119,000

The inventory on January 1, 2016 consisted of the following:

Raw materials $ 30,000
Work in process 100,000
Finished goods 140,000
  $270,000

A review of the books and records disclosed that the gross profit margin historically approximated 25% of sales. The sales for the first six months of 2016 were $340,000. Raw material purchases were $115,000. Direct labor costs for this period were $80,000, and manufacturing overhead was historically applied at 50% of direct labor.

 

Sep 19 2020 View more View Less

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