On September 22, 2016, a flood destroyed the entire merchandise inventory on hand in a warehouse owned by the Rocklin Sporting Goods Company. The following information is available from the records of the company's periodic inventory system: Required: Complete the below table to estimate the cost of inventory destroyed in the flood using the gross profit method.

Inventory - January 1, 2016 $147,000
Net purchases - January 1 through September 22 377,000
Net sales - January 1 through September 22 585,000
Gross profit ratio 25%

The cost of inventory destroyed in the flood using the gross profit method is $5,585,250

Explanation:

The cost of inventory destroyed in the flood using the gross profit method.

Sales                                                                                 22 585,000

Less Cost of Goods Sold :

Opening Stock                                     147,000

Add Purchases                               22 377,000

                                                        22524,000

Less Closing Stock (Balance)         (5,585,250)

Cost of Sales                                                                      (16,938,750)

Gross Profit                                                                           5,646,250

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