Page 74 - Accountancy_F5

Exercise 2.6
1. Jembe’s inventory was destroyed by fire on 31 December 2024 except for a
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salvage that was valued at TZS 980,000. The figures below were extracted from
the accounts locked in the fireproof room.

Details TZS
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Inventory as at 1 January, 2024 42,000,000
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Wages 89,600,000

Purchases 176,400,000
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Sales 347,200,000
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Required: Estimate the value of inventory destroyed by fire on 31 December 2024.
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Take a gross profit base of 25% of turnover.
2. Dau made the following transactions during the quarter of July – September, 2024.
Purchases total TZS 30,000,000 and net sales amounting to TZS 31,250,000. On
30 June 2024, Dau had inventory costing TZS 4,200,000 and gross profit margin
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of 20 per cent.
Required: Estimate the value of inventory as at 30 September 2024.
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3. Reported data of Wadau stores for the year ended 31 December 2023 were as
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follows:
Details Costs price Retail price

TZS TZS
Opening inventory 110,000 192,000
Purchases 1,660,000 2,792,000
Sales - 2,560,000
Closing inventory 190,000

Required: Use retail price method to determine the accuracy of the reported cost of
closing inventory.

Inventory valuation and insurance claim

Insurance is an agreement between two parties: the insured and the insurer. In exchange
for a premium, the insurer agrees to compensate the insured in the event of a loss. The
amount insured, upon which the insurance payout is based, is known as the sum insured.
Over-Insurance; occurs when the sum insured exceeds the actual value of the insured
item. For instance, if the sum insured is greater than the value of the inventory present
prior to an accident, the inventory is considered over-insured. In such cases, the insurance
claim is equal to the actual value of the destroyed inventory, that is the actual loss.

Student’s Book Form Five
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