EX 7-22 Gross profit inventory method
The merchandise inventory was destroyed by fire on December 13. The following were obtained from the accounting records:
|
Jan. 1 |
Merchandise inventory |
$ 500,000 |
|
Jan. 1–Dec. 13 |
Purchases (net) |
4,280,000 |
|
Sales (net) |
6,500,000 |
|
|
Estimated gross profi t rate |
36% |
a. Estimate the cost of the merchandise destroyed.
b. Briefly describe the situations in which the gross profit method is useful.