On September 22, 2018, a flood destroyed the entire merchandise inventory on hand in a warehouse owned by the Rocklin Sporting Goods Company. The following information is available from the records of the company's periodic inventory system:
Inventory, January 1, 2018 ........................................... $140,000
Net purchases, January 1 through September 22 .................. 370,000
Net sales, January 1 through September 22 ........................ 550,000
Gross profit ratio ...................................................... 25%
Required:
Estimate the cost of inventory destroyed in the flood using the gross profit method.