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Question - When Laura Rapp arrived at her store on the morning of January 29, she found empty shelves and display racks; thieves had broken in during the night and stolen the entire inventory. Rapp's accounting records showed that she had inventory costing $50,000 on January 1. From January 1 to January 29, she had made net sales of $70,000 and net purchases of $80,000. The gross profit during the past several years had consistently averaged 45 percent of net sales. Rapp wishes to file an insurance claim for the theft loss.
a. Using the gross profit method, estimate the cost of Rapp's inventory at the time of the theft.
b. Does Rapp use the periodic inventory method or does she account for inventory using the perpetual method? Defend your answer.
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