Because you did not observe the inventory, which was destroyed in the fire, estimate ending inventory using the 2013 and 2014 dollars and percentages.

a. Because you did not observe the inventory, estimate the ending inventory for 2015 by:

i. Averaging the 2013 and 2014 cost of goods sold and 2013 and 2014 gross receipts, and then dividing the average cost of goods sold by the average gross receipts. You cannot use an average of an average (e.g., Cost of goods sold/Gross receipts ratios for 2013 and 2014), which can distort the average. You must calculate the average for each and then the Cost of goods sold/Gross receipts ratio.

ii. Multiply the resultant percentage from 3.a.i. by the 2015 gross receipts to get an estimated 2015 cost of goods sold total in dollars.