Question: 1. How does the choice of an inventory cost flow assumption impact the cash flow of acompany?
2. Webster, Inc.'s inventory was destroyed in a tornado. The damage occurred on July 21 and their accounting records up to the date were as follows:
Inventory, January 1 at cost $1,950,000
Purchases January through July 15 at cost 2,250,000
Sales January through July 15 4,600,000
Normal gross profit percentage of sales 30%
What is the estimated cost of the inventory lost in the tornado? Show all work and label your final answer clearly.