The merchandise inventory was destroyed by fire on August 19. The following data were obtained from the accounting records:
|
Jan. 1
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Merchandise inventory
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$ 360,000
|
|
Jan. 1-Aug. 19
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Purchases (net)
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3,200,000
|
|
|
Sales (net)
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5,200,000
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|
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Estimated gross profit rate
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36%
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a. Estimate the cost of the merchandise destroyed.
b. Briefly describe the situations in which the gross profit method is useful.