Gross profit method.

On December 31, 2014 Felt Company's inventory burned. Sales and purchases for the year had been $1,500,000 and $980,000, respectively. The beginning inventory (Jan. 1, 2014) was $170,000; in the past Felt's gross profit has averaged 40% of selling price.

Instructions

Compute the estimated cost of inventory burned, and give entries as of December 31, 2014 to close merchandise accounts.