Gross profit method The inventory was destroyed by fire on December 31. The following data were obtained from the accounting records:

Jan. 1 Inventory $ 350,000 Jan. 1–Dec. 31 Purchases (net) 2,950,000 Sales 4,440,000 Estimated gross profit rate 35%

a. Estimate the cost of the inventory destroyed.

b. Briefly describe the situations in which the gross profit method is useful.

AppendixLO1