SAQ 1. A fire occurred on April 15, 2015, and destroyed the business premises of X & Co. Thebooks of accounts and Stock amounting to ` 1,80,000 were saved and the following information wasrendered available from the books:Particulars Sales Gross Profit(`````) (`````)Year ending December 31, 2010 86,00,000 21,50,000Year ending December 31, 2011 71,00.000 21,30,000Year ending December 31, 2012 60,00,000 20,00,000Year ending December 31, 2013 55,00,000 18,70,000Year ending December 31, 2014 48,00,000 16,00,000The stock on December 31, 2014, was valued at ` 9,70,000. The Purchases, sales and productionwages from January 1, 2015 to April 14, 2015 were ascertained at ` 7,50,000, ` 15,90,000 and` 3,00,000 respectively.You are to prepare a statement in support of your claim against the Insurance Company togetherwith any comments you may feel necessary to make
Question
SAQ 1. A fire occurred on April 15, 2015, and destroyed the business premises of X & Co. Thebooks of accounts and Stock amounting to 1,80,000 were saved and the following information wasrendered available from the books:Particulars Sales Gross Profit(`````) (`````)Year ending December 31, 2010 86,00,000 21,50,000Year ending December 31, 2011 71,00.000 21,30,000Year ending December 31, 2012 60,00,000 20,00,000Year ending December 31, 2013 55,00,000 18,70,000Year ending December 31, 2014 48,00,000 16,00,000The stock on December 31, 2014, was valued at 9,70,000. The Purchases, sales and productionwages from January 1, 2015 to April 14, 2015 were ascertained at 7,50,000, 15,90,000 and` 3,00,000 respectively.You are to prepare a statement in support of your claim against the Insurance Company togetherwith any comments you may feel necessary to make
Solution
To prepare a statement in support of the claim against the Insurance Company, we need to calculate the expected gross profit for the period from January 1, 2015 to April 14, 2015, and then determine the value of the stock lost in the fire.
Step 1: Calculate the Gross Profit Ratio for previous years
The Gross Profit Ratio is calculated as (Gross Profit / Sales) * 100.
For example, for the year ending December 31, 2014, the Gross Profit Ratio would be (16,00,000 / 48,00,000) * 100 = 33.33%
Step 2: Calculate the average Gross Profit Ratio
Add up the Gross Profit Ratios for all the years and divide by the number of years to get the average.
Step 3: Calculate the expected Gross Profit for the period from January 1, 2015 to April 14, 2015
Multiply the Sales for this period by the average Gross Profit Ratio.
For example, if the average Gross Profit Ratio is 33.33%, the expected Gross Profit would be (15,90,000 * 33.33 / 100) = 5,30,037
Step 4: Calculate the value of the stock on April 14, 2015
Add the value of the stock on December 31, 2014 to the Purchases and production wages for the period from January 1, 2015 to April 14, 2015, and then subtract the Sales for this period.
For example, the value of the stock would be (9,70,000 + 7,50,000 + 3,00,000 - 15,90,000) = 4,30,000
Step 5: Calculate the value of the stock lost in the fire
Subtract the value of the stock saved from the value of the stock on April 14, 2015.
For example, the value of the stock lost would be (4,30,000 - 1,80,000) = 2,50,000
The claim against the Insurance Company would be for the expected Gross Profit plus the value of the stock lost in the fire.
In this case, the claim would be (5,30,037 + 2,50,000) = 7,80,037
It's important to note that this is a simplified example and the actual calculation may be more complex, depending on the specific details of the case.
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