Banjo Company suffered a loss of its inventory on March 28 due to a fire in its warehouse. As a basis for filing a claim with its insurance company, Banjo Company developed the following information:

March net sales through March 28$350,000

Beginning Inventory, March 1100,000

Merchandise purchases through March 28180,000

The company has experienced an average gross profit rate of 35% in the past and this rate appears to be appropriate in the current period.

Instructions

Using the gross profit method, prepare estimate of the cost of the inventory destroyed by fire on March 28. Show all computations in good form.