The inventory of Florence Company was destroyed by fire on March 1. From an using the gross profit method — examination of the accounting records, the following data for the first 2 months of the year of estimating inventory. are obtained: Sales Revenue $51,000, Sales Returns and Allowances $1,000, Purchases

(LO 8) $31,200, Freight-In $1,200, and Purchase Returns and Allowances $1,800.

Instructions Determine the merchandise lost by fire, assuming:

(a) A beginning inventory of $20,000 and a gross profit rate of 40% on net sales.

(b) A beginning inventory of $30,000 and a gross profit rate of 32% on net sales.