Estimation of Flood Loss On June 30, 2007 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, 2007 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 2007 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.
Required
Compute the value of the work in process inventory lost at June 30, 2007. Show supporting computations in good form.