Problem - Late on the night of September 30, 2011, an arsonist destroyed the Pumpkin Company warehouse, which was full of inventory. Luckily the accounting records were stored in another facility and not destroyed in the fire. Pumpkin Company is in the process of filing a claim with its insurance company for the inventory loss due to the fire.

Beginning inventory                                            $225,500

Purchases through September 30, 2011                623,250

Net sales revenue through Sept. 30, 2011             825,500

The gross margin percent has historically been 30% of net sales revenue.

Required: Estimate the value of the inventory destroyed in the fire using the gross margin method.