A fire destroyed a warehouse of the Goren Group, Inc., on May 4, 2018. Accounting records on that date indicated the following:
Merchandise inventory, January 1, 2018 ....................... $1,900,000
Purchases to date .................................................. 5,800,000
Freight-in ........................................................... 400,000
Sales to date ....................................................... 8,200,000
The gross profit ratio has averaged 20% of sales for the past four years.
Required:
Use the gross profit method to estimate the cost of the inventory destroyed in the fire.