*P6-10B Hannigan Company lost all of its inventory in a fire on December 26, 2008. The accounting records showed the following gross profit data for November and December.
December
November (to 12/26)
Net sales $500,000 $400,000
Beginning inventory 34,100 31,100
Purchases 334,975 246,000
Purchase returns and allowances 11,800 5,000
Purchase discounts 7,577 6,000
Freight-in 6,402 3,700
Ending inventory 31,100 ?
Hannigan is fully insured for fire losses but must prepare a report for the insurance company.
Instructions
(a) Compute the gross profit rate for November.
(b) Using the gross profit rate for November, determine the estimated cost of the inventory lost in the fire.
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