Appendix EX 7-26 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. 31 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