The inventory of Ipswich Company Ltd. was destroyed by fire on March 1. From an examination of the accounting records, the following data for the first 2 months of the year are obtained: Sales Revenue £51,000, Sales Returns and Allowances £1,000, Purchases £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.