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Question - Banjo Company suffered a loss of its inventory on March 28 due to a fire in its warehouse. As a basis for filing a claim with its insurance company, Banjo Company developed the following information:
March net sales through March 28 $350,000
Beginning Inventory, March 1 100,000
Merchandise purchases through March 28 180,000
The company has experienced an average gross profit rate of 35% in the past and this rate appears to be appropriate in the current period.
Required - Using the gross profit method, prepare estimate of the cost of the inventory destroyed by fire on March 28. Show all computations in good form.
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