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Gross profit method. On December 31, 2010 Felt Company's inventory burned. Sales and purchases for the year had been $1,400,000 and $980,000, respectively. The beginning inventory (Jan. 1, 2010) was $170,000; in the past Felt's gross profit has averaged 40% of selling price.
Compute the estimated cost of inventory burned, and give entries as of December 31, 2010 to close merchandise accounts.
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