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The inventory of Faber Company was destroyed by fire on March 1. From an examination of the accounting records, the following data for the first 2 months of the year are obtained: Sales $51,000, Sales Returns and Allowances $1,000, Purchases $31,200, Freight-in $1,200, and Purchase Returns and Allowances $1,400.
Determine the merchandise lost by fire, assuming:
(a) A beginning inventory of $20,000 and a gross profit rate of 40% on net sales.
(b) A beginning inventory of $30,000 and a gross profit rate of 30% on net sales.
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