The merchandise inventory was destroyed by fire on Aug. 19. The following is the data:
Jan 1 Merchandise inventory $360,000
1/1 - 8/19 Purchases (net) 3,200,000
sales (net) 5,200,000
Estimated gross profit rate 35%
a. Estimate the cost of the merchandise destroyed.
b Briefly describe the situations in which the gross profit method is useful.