The inventory of Lemon 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.

Instructions

Determine the merchandise lost by fire, assuming:

(a) A beginning inventory of $20,000 and a gross profit rate of 30% on net sales.

Merchandise lost $

(b) A beginning inventory of $30,000 and a gross profit rate of 25% on net sales.

Merhandise lost $

The text didn't really explain this part too well - I am at a lost what number to use and what not to plug in.