CMA Intermediate · Financial Accounting · Consignment
Singh Ltd. consigned 400 units costing Rs 100 each to Das & Co., paying Rs 8,000 as freight. In transit, 40 units were destroyed by fire (abnormal loss). The insurance company admitted a claim of Rs 3,000. What amount is transferred to the Profit and Loss Account as abnormal loss?
The net abnormal loss is the cost of the lost units plus their share of freight, less the insurance claim admitted. Here that is Rs 4,800 less Rs 3,000, and the balance is transferred to the Profit and Loss Account.
- ARs 1,000
- BRs 1,400Correct
- CRs 4,400
- DRs 800
Explanation
Cost of 40 units = 4,000. Freight share = 8,000 x 40/400 = 800. Abnormal loss = 4,800. Less claim admitted 3,000 = 1,800. Rs 1,800 is the net loss, which is not among the options, so the key is flagged as unreliable.
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