Your harddrive crashes and as a result you lose data necessary to accurately calculate cost of goods sold. The CPA elects to estimate cost of goods sold by employng the gross profit method. That is using the relation between cost and sales as exhibited in the past and applying the percentage to sales data that is available.

A. This is prohibited as cost of goods sold is an account that is commonly abused

B. Is permitted but the number should be presented in dollars and sense so as to avoid appearing as an estimate

C. is permitted because the need to use estimates is due to computer failure which, along with natural disasters, are the exclusive justifiable and accepted basis for using estimates

D .This is permssible, but the fact that it is an estimate must be disclosed if the use of estimates in the return is extensive