Editing PART C - THINKING - 18 MARKS 1. Eagle Equipment Company suffered a loss of inventory on July 31 due to a fire in its warehouse. As a basis for filing a claim with its insurance company, Eagle Equipment Company developed the following information: July net sales $400,000 Beginning Inventory, July 1 200,000 Merchandise purchases through July 31 150,000 Merchandise undamaged by fire 15,000 The company has experienced an average gross profit rate of 35% in the past and this rate appears to be appropriate in the current period. Instructions Using the gross profit method, prepare an estimate of the cost of the inventory destroyed by fire on July 31. Show all calculations in good form. Show all calculations (6 Marks) No calculations - No marks 2. In a paragraph, outline two inventory related problems that a retailer must deal with on an ongoing basis. There is no one right answer. The marks will come from your explanation, not listing the problems. (4 marks) 3. Frankie's Fireworks sells fireworks to businesses and individual consumers. At the end of 2018, the inventory was properly stated. However, after taking physical inventory at the end of 2019, it was discovered that a skid of inventory was not included in the count. Instructions: Indicate if the accounts below would be overstated, understated, or no effect on the following accounts. Also give a reason why this would be the case: 10 Marks) Reason Overstated. understated or no effect 2 Total assets for 2019 Total Liabilities for 2019 Owner's equity 2019 Cost of goods sold 2010 Net income 2018