O’Reilly Company lost all of its inventory in a fire on December 26, 2010. The accounting records showed the following gross profit data for November and December.
|
December |
||
|
November |
(to 12/26) |
|
|
Net sales |
$600,000 |
$700,000 |
|
Beginning inventory |
32,000 |
36,000 |
|
Purchases |
377,000 |
424,000 |
|
Purchase returns and allowances |
13,300 |
14,900 |
|
Purchase discounts |
8,500 |
9,500 |
|
Freight in |
8,800 |
9,900 |
|
Ending inventory |
36,000 |
? |
O’Reilly is fully insured for fire losses but must prepare a report for the insurance company.
Instructions
(a) Compute the gross profit rate for November.
(b) Using the gross profit rate for November, determine the estimated cost of the inventory lost in the fire.