Merrett Company lost 80% of its inventory in a fire on
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Merrett Company lost 80% of its inventory in a fire on March 23, 2014. The accounting records showed the following gro
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Merrett Company lost 80% of its inventory in a fire on March 23, 2014. The accounting records showed the following gross profit data for February and March: Merrett is fully insured for fire losses but must prepare a report for the insurance company. Instructions Determine the amount of inventory lost by Merrett as a result of the fire using the gross profit method. Taking It Further The insurance adjustor is concerned that this method of calculating the cost of the inventory destroyed might not be accurate. What factors contribute to the accuracy of the ending inventory amount when using the gross profit method?
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