Problem
On September 20, 2020, a major flood at Epp Company's warehouse caused severe damage to its entire inventory. The following information was available from Epp's accounting records:
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Inventory at September 1, 2020
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$75,000
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Purchases from September 1, 2020 to the date of the flood
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$180,000
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Net sales from September 1, 2020 to the date of the flood
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$250,000
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Based on recent history, Epp had a gross margin (profit) of 40% of net sales.
Using the Gross Profit Method, what is the estimated loss on the inventory in the flood.