Question

Franklin Co. has experienced gross profit ratios for 2016, 2015, and 2014 of 34.00%, 30.50%, and 31.25%, respectively. On April 3, 2017, the firm's plant and all its inventory were destroyed by a tornado. Accounting records for 2017, which were available because they were stored in a protected vault, showed the following: Sales from January 1 thru April 2 $ 149,790 January 1 inventory amount 63,920 Purchases of inventory from January 1 thru April 2 118,626 I don't understand how to solve this equation. The solution to the equation is

Required:

Calculate the amount of the insurance claim to be filed for the inventory destroyed in the tornado. (Hint: Use the cost of goods sold model and a gross profit ratio that will result in the largest claim.) (Do not round intermediate calculations.)

Answer 1