Calculating Fire Insurance Claim: Adjustments for Abnormal Goods

The video tutorial explains how to handle a fire incident affecting ABC Limited's premises, focusing on stock valuation, trading account preparation, and adjustments for abnormal goods. It details calculating the gross profit ratio and applying it to current year sales. The tutorial concludes with calculating the insurance claim using the average clause, considering both normal and abnormal goods.

What event led to the need for calculating an insurance claim for ABC Limited?

• Theft of inventory.

• A fire destroyed the premises.

• A natural disaster.

• A flood destroyed the premises.

What is the significance of the abnormal goods in the trading account?

• They are sold at a loss or no profit.

• They are sold at a higher profit.

• They are always valued at market price.

• They are not included in the trading account.

What was the original cost of the stock that was written off as a poor selling line?

• 4000

• 9000

• 7000

• 5000

Why is it important to calculate the gross profit ratio?

• To find the total sales.

• To calculate the net profit.

• To apply it to current year sales for stock valuation.

• To determine the selling price of goods.

How is the selling price of abnormal goods calculated when sold at a loss?

• Original cost minus loss amount.

• Original cost plus profit.

• Market value minus loss.

• Market value plus profit.

How are unrecorded purchases treated in the trading account?

• They are subtracted from the sales.

• They are recorded as expenses.

• They are ignored.

• They are added to the purchases.

What is the effect of abnormal goods on the gross profit ratio?

• They have no effect on the gross profit ratio.

• They increase the gross profit ratio.

• They decrease the gross profit ratio.

• They require separate treatment to maintain a uniform ratio.

What is the purpose of applying the average clause in insurance claims?

• To increase the claim amount.

• To adjust for underinsurance.

• To determine the salvage value.

• To calculate the total loss.

What is the salvage value mentioned in the problem?

• 5000

• 15500

• 4500

• 9000

What is the final claim value calculated using the average clause?

• 60000

• 75500

• 50000

• 39735