Estimating ending inventory by the gross profit method [10-15 min]
Deluxe Auto Parts holds inventory all over the world. Assume that the records for one auto part show the following:
Beginning inventory. . . . . . | $ 220,000 |
Net purchases. . . . . . . . . . . | 800,000 |
Net sales. . . . . . . . . . . . . . | 1,100,000 |
Gross profit rate. . . . . . . . . | 45% |
Suppose this inventory, stored in the United States, was lost in a fire.
Requirement
1. Estimate the amount of the loss to Deluxe Auto Parts. Use the gross profit method.
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