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Question(s) / Instruction(s):

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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