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 (net) 4,440,000 Estimated gross profit rate 35% a. Estimate the cost of the merchandise destroyed. Cost of the Merchandise Destroyed b. Briefly describe the situations in which the gross profit method is useful. 1. The gross profit method is useful for estimating inventories for monthly or quarterly financial statements. 2. It is useful in estimating the cost of merchandise destroyed by fire or other disasters. 3. It is useful in reducing the carrying cost of inventory. 4. It is useful in achieving a higher net income.

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 (net) 4,440,000 Estimated gross profit rate 35% a. Estimate the cost of the merchandise destroyed. Cost of the Merchandise Destroyed b. Briefly describe the situations in which the gross profit method is useful. 1. The gross profit method is useful for estimating inventories for monthly or quarterly financial statements. 2. It is useful in estimating the cost of merchandise destroyed by fire or other disasters. 3. It is useful in reducing the carrying cost of inventory. 4. It is useful in achieving a higher net income.

Name: Gross Profit MethodThe merchandise inventory was destroyed by fire on
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Description: Gross Profit MethodThe merchandise inventory was destroyed by fire on December 13. The following data were obtained from the accounting records:Jan. 1Merchandise inventory$350,000Jan. 1-Dec. 31Purchases (net)2,950,000Sales (net)4.440,000Estimated gr

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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