A fire destroyed the Churchill Company's warehouse on March 15, 2020. Only goods with a normal selling price of $12,500 and a net realizable value of $5,000 were saved. The following information is available from the company's records: $250,000 Inventory in warehouse, 1/1/20 Purchases, 1/1/20-3/15/20 620,000 Purchase returns 9,500 14,000 Freight-in Sales, 1/1/20-3/15/20 850,000 Sales returns 20,000 For the period from 2015 through 2019, Churchill had a gross profit of $2,100,000 on net sales of $6,000,000. Required: a. Estimate Churchill's inventory loss from the fire using the gross profit method. Estimated fire loss $ b. What assumptions allow the use of the gross profit method in these circumstances? The gross profit method assumes that a company's gross profit rate in the current period (1/1/20-3/15/20) is materially different from the previous period or periods (in this case the years 2015-2019). This implies that the product mix and profit and cost ratios have not materially changed. materially not materially