On August 17, the company’s inventory was destroyed in a hurricane-related flood. For insurance purposes, the company must reliably estimate the amount of inventory on hand on August 17. The company uses a periodic inventory system. The following data have been assembled:
Inventory, January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,650,000
Purchases, January 1–August 17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,130,000
Sales, January 1–August 17 . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . 6,500,000
Historical gross profit percentages:
Last year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60%
Two years ago . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65%
Estimate the company’s inventory as of August 17 using (1) last year’s gross profit percentage and (2) the gross profit percentage from two years ago.