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The inventory of Lanakai Company was destroyed by a major flood on January 1, 2020. From an examination of the accounting records, the following information for the year ended December 31, 2019 are obtained from aa review of the accounting records.
Sales $550,000Sales Returns and Allowances 20,000Purchases 345,000Freight-In 10,000Purchase Returns and Allowances 14,000
Required:
Problem 1: Determine the inventory lost by flood using the Gross Profit (Margin) Method, assuming a beginning inventory of $30,000 and a gross profit (margin) rate of 25% on net sales.
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