Leo, Inc., was organized on January 1, 2020. On December 31, 2021, the company lost most of its inventory in a warehouse fire just before the year-end count of inventory was to take place. The companys records disclosed the following data:

On January 1, 2021, Leo pricing policy was changed so that the gross profit rate would be three percentage points higher than the one earned in 2020. Salvaged undamaged merchandise was marked to sell at P24,000 while damaged merchandise marked to sell at P16,000 had an estimated realizable value of P3,600.

1. What is the companys gross profit rate beginning January 1, 2021?

1. 17%

2. 20%

3. 21%

4. 24%

2. How much is the inventory fire loss?

1. P254,000

2. P164,920

3. P189,400

4. P183,640

Inventory, Jan. 1 Purchases Purchase returns and allowances Sales Sales returns and allowances 2020 2021 PO P204,000 860,000 692,000 46,120 64,600 788,000 836,000 16,000 20,000