Horton, Inc. suffered an inventory loss due to a flood. The following information is available to you. 

Beginning inventory ...........$100,000

Net purchase ............... 400,000

Sales ................. 400,000

Inventory salvaged from flood ......... 50,000

Instructions

Use the gross profit method for estimating inventory to determine the loss due to the flood, assuming

(a) Gross profit is 25% of sales

(b) Gross profit is 25% of the cost of goods sold.