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Question - Select information for Rays Corp.'s inventory was available as follows for calendar 2020:
Sales $540,000
Net purchases 380,000
Beginning inventory 75,000
Rays' gross profit on sales was 30% last year, its first year of operations. A fire on December 31, 2020, destroyed the entire inventory.
Required -
1. Using the gross profit method, calculate the estimated cost of the inventory destroyed in the fire.
2. Prepare entries on December 31, 2020, to close the inventory accounts.
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