A Fire Destroyed the Warehouse of Reed Enterprises, on August

question 19

Multiple Choice

A fire destroyed the warehouse of Reed Enterprises, on August 31, 2017. The books and records of Reed showed the following information on that date. $$\begin{array} { | l | r | } \hline \text { Merchandise Inventory. Jan. 1, 2017 } & \$ 540,000 \\\hline \text { Purchases to date } & 950,000 \\\hline \text { Freight - In } & 40,000 \\\hline \text { Sales to date } & \$ 2,300,000 \\\hline\end{array}$$
The gross profit ratio has averaged 60 % of sales for the past six years.
Required:
Use the gross profit method to estimate the cost of inventory destroyed by fire.

• A) $610,000
• B) $1,530,000
• C) $920,000
• D) $1,490,000

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