Gross profit method The merchandise inventory was destroyed by fire on December 13. The following data were obtained from the accounting records:

Jan. 1 Merchandise inventory $ 350,000 Jan. 1–Dec. 13 Purchases (net) 2,950,000 Sales 4,440,000 Estimated gross profit rate 35%

a. Estimate the cost of the merchandise destroyed.

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

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