Question 3 Charles operates a retail business in London. On 30 June 2003, there was a fire

Question 3

Charles operates a retail business in London. On 30 June 2003, there was a fire in his store. His books of account and most of his stock were destroyed. The value of the undamaged stock was agreed at ＄5,000.

His Trading Account for the year ended 31 December 2002 was as follows:

＄ ＄

Sales 492,000

Opening stock 31,000

Purchases 154,000

185,000

Less: Closing stock 37,400

Gross profit 147,600 344,400

On 1 January 2003, his trade creditors totaled ＄15,000 and monthly statements received by him in early July showed that the trade creditors on 30 June 2003 amounted to ＄31,000.

All sales in Charles' business are on a strict cash basis and his stock is fully insured. According to his bank statements, he received ＄270,000 from customers and paid ＄69,000 to suppliers between I January and 30 June 2003.

Charles informs you that he increased his selling prices by 20% on 1 January 2003 but purchase prices have remained unchanged for several years.

Required:

Calculate the cost of the stock lost by Charles on 30 June 2003.