If a fire destroys the inventory, the gross profit method can be used to estimate the cost of merchandise destroyed.

Question

Quizplus · Accepted Answer

The gross profit method can be used to estimate the cost of merchandise destroyed in case of a fire or any other loss. This method estimates the cost of goods sold based on the gross profit percentage and the sales revenue. By subtracting the estimated cost of goods sold from the sales revenue, the estimated gross profit can be calculated, which then can help in estimating the cost of inventory lost in the fire.

If a Fire Destroys the Inventory, the Gross Profit Method