Gross Profit Method

A fire completely destroyed all the inventory of Glisan Lumber Yard on August $5,20-.$ Fortunately, the accounting records were not destroyed in the fire. following information is provided by Glisan Lumber Yard for the time period January $1$ through August $5$:

Beginning inventory, January $1,20--$ $$104,000$

Net purchases, January $1$ through August $5,418,000$

Net sales, January $1$ through August $5,723,000$

Normal gross profit as a percentage of sales $45\%$

Required:

Estimate the amount of merchandise inventory destroyed in the fire on August $5$ using the gross profit method.

$$439,200x$

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T Check My Work

Use the firm's normal gross profit as a percentage of net sales to estimate cost of goods sold and ending inventory in three steps:

Compute the cost of goods available for sale.

Estimate cost of goods sold by deducting the normal gross profit $($net sales $x$ normal gross profit as percentage of net sales$)$ from net sales.

Estimate the ending inventory by deducting cost of goods sold from the cost of goods available for sale.

$2$ more Check My Work uses remaining.

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