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

Question

Quizplus · Accepted Answer

The gross profit method is a way to estimate the cost of merchandise destroyed or lost due to various reasons including fire, theft, or natural disaster. It is calculated by subtracting the cost of goods sold from the net sales, which gives the gross profit. By using this method, it is possible to estimate the cost of the lost or destroyed merchandise based on the gross profit percentage.

If a Fire Destroys the Merchandise Inventory, the Gross Profit