Homework Answers
A.
Sales = $4,470,000
Gross profit rate = 40%
Gross profit = Sales x Gross profit rate
= 4,470,000 x 40%
= $1,788,000
Cost of goods sold = Sales - Gross profit
= 4,470,000 - 1,788,000
= $2,682,000
Merchandise available for sale = Beginning inventory + purchases
= 365,000 + 2,880,000
= $3,245,000
Estimated cost of inventory destroyed
| Merchandise available for sale | 3,245,000 |
| Less : Cost of goods sold | -2,682,000 |
| Cost of inventory destroyed | $563,000 |
B.
The gross profit method is useful for determining the sales price of merchandise, for estimating the cost of merchandise destroyed by fire or other disasters and for estimating inventories for monthly or quarterly financial statements.
Third, fourth and fifth option are correct option.
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