Estimating ending inventory by the gross profit method [10–15 min]

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.