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Estimate the cost of the merchandise destroyed

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Reference no: EM13530971

The merchandise inventory was destroyed by fire on August 19. The following data were obtained from the accounting records:

Jan. 1

Merchandise inventory

$ 360,000

Jan. 1-Aug. 19

Purchases (net)

3,200,000

 

Sales (net)

5,200,000

 

Estimated gross profit rate

36%

a. Estimate the cost of the merchandise destroyed.

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

Reference no: EM13530971

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