On April 10, 2016, fire destroyed the office and warehouse of Robo, Ltd. Most of the accounting records were destroyed, but the following account balances were determined as at 31 March 2016. Inventory, 1 January 2016, $80,000; Sales (1 January 31 March 2016), P180,000; Purchases (1 January 31 March 2016), P94,000.

The companys financial year ends on 31 December. It uses a periodic inventory system. From an analysis of the April bank statement, you discover cancelled cheques of $4,200 for cash purchases during the period 1-10 April. Deposits during the same period totaled $18,500. Of that amount, 60% were collections on accounts receivable, and the balance was cash sales.

Correspondence with the companys principal suppliers revealed $12,400 of purchases on account from 1 April to 10 April. Of that amount, $1,600 was for inventory in transit on 10 April that was shipped FOB destination.

Correspondence with the companys principal customers produced acknowledgments of credit sales totaling $28,000 from 1 April to 10 April. It was estimated that $5,100 of credit sales will never be acknowledged or recovered from customers.

Robo Ltd. Reached an agreement with the insurance company that its fire loss claim should be based on the average of the gross profit ratios for the preceding 2 years. The financial statements for 2015 and 2014 showed the following data.

Inventory with cost of $17,000 was salvaged from the fire.

	2015	2014
Net Sales	$600,000	$480,000
Cost of goods purchased	416,000	356,000
Beginning inventory	60,000	40,000
Ending inventory	80,000	60,000

Instructions:

Use Case Analysis format in answering the following:

Determine the balances in (1) Sales and (2) Purchases as at 10 April.

Determine the average profit rate for the years 2014 and 2015. (Hint: Find the gross profit ratio for each year and divide the sum by 2).

Determine the inventory loss as a result of the fire, using the gross profit method.