Over the last two years, McAllister Company has averaged 35 percent gross profit. At the end of 2019, the auditor found the following data in the records of the company:

Inquiry by the auditor revealed that employees of McAllister Company had estimated the inventory on December 31, 2019, instead of taking a complete physical count.

INSTRUCTIONS
Using the gross profit method of inventory estimation, verify the reasonableness (or lack of reasonableness) of the inventory estimate made by the company€™s employees.
Analyze: If a physical inventory count on December 31, 2019, revealed an ending inventory of $260,000, calculate the gross profit percentage.

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$3,075,000 Sales Cost of goods sold: $ 210,000 Inventory, January 1, 2019 Purchases 2,090,000 Total merchandise available for sale 2,300,000 Less inventory, December 31, 2019 Cost of goods sold Gross profit on sales 302,000 1,998,000 $1,077,000