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Estimate the cost of the inventory destroyed

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Reference no: EM132741299

Problem - The merchandise inventory was destroyed by fire on December 31. The following data were obtained from the accounting records:

Jan. 1 Inventory $350,000

Jan. 1-Dec. 31 Purchases (net) 2,950,000

Sales 4,440,000

Estimated gross profit rate 35%

Required -

a. Estimate the cost of the inventory destroyed.

b. Briefly describe the situations in which the gross profit method is useful.

Reference no: EM132741299

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