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    Computing work-in-process inventory from balance sheet

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    On June 30, 2011, a tornado damaged Jensen Corporation's warehouse and factor completely destroying the work-in-process inventory. Neither the raw materials nor finished goods inventories were damaged. A physical inventory taken after the tornado revealed the following values:

    Raw materials $87,000
    Work-in-process 0
    Finished goods $151,000
    Total $238,000

    The inventory of January 1, 2011, consisted of the following:

    Raw materials $41,000
    work-in-process $128,000
    Finished goods $173,000
    Total $342,000

    A review of the books and records disclosed that the gross profit margin historically approximated 28% of sales. The sales total for the first six months of 2011 was $405,000. Raw material purchases totaled $150,000. Direct labor costs for this period were $112,000, and manufacturing overhead has historically been applied at 50% of direct labor.

    Compute the value of the work-in-process inventory lost at June 30, 2011. Show supporting computations.

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    Solution Preview

    Dear student,

    Here is the answer:

    sales 405000
    less:gross margin 113400
    cost of sales 291600
    less:opening finished goods 173000

    Solution Summary

    The expert computes the work-in-process inventory from balance sheets.