Using the gross profit rate for February, determine both the estimated total inventory and inventory…

Liis Company lost 70% of its inventory in a fire on March 25, 2014. The accounting records showed the following gross profit data for February and March.

February

March
(to 3/25)

Net sales

$300,000

$250,000

Net purchases

176,800

139,000

Freight-in

3,900

3,000

Beginning inventory

4,500

20,200

Ending inventory

20,200

?

Liis Company is fully insured for fire losses but must prepare a report for the insurance company.

Instructions

(a) Compute the gross profit rate for the month of February.

(b) Using the gross profit rate for February, determine both the estimated total inventory and inventory lost in the fire in March.

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