Estimating ending inventory by the gross profit method
Deluxe Auto Parts holds inventory all over the world. Assume that the records for one auto part show the following:
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Beginning inventory
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$ 220,000
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Net purchases
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800,000
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Net sales
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1,100,000
|
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Gross profit rate
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45%
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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.