Part 1 - Gross Profit Method

Horton, Inc. suffered an inventory loss due to a flood. The following information is available to you.

Beginning inventory $100,000

Net purchase 400,000

Sales 400,000

Inventory salvaged from flood 50,000

Instructions - Use the gross profit method for estimating inventory to determine the loss due to the flood, assuming (a) gross profit is 25% of sales, and (b) gross profit is 25% of the cost of goods sold.

Part 2 - Retail Inventory Method 

The records of Greene Company report the following data for the month of April.

Sales $204,000 Purchases (at cost) $ 96,000

Sales returns 4,000 Purchases (at sales price) 176,000

Additional markups 20,000 Purchase returns (at cost) 4,000

Markup cancellations 3,000 Purchase returns (at sales price) 6,000

Markdowns 18,600 Beginning inventory (at cost) 60,000

Markdown cancellations 5,600 Beginning inventory (at sales price) 93,000

Freight on purchases 2,000

Instructions - Compute the ending inventory by the conventional retail inventory method.