Gross Profit Method
the Walnut Shop Is a Furniture Company

Gross profit method
The Walnut Shop is a furniture company that uses a periodic inventory system. On 8 February, 2013, a fire destroyed all the furniture on display in the company's main showroom. Fortunately, $350,000 of the company's inventory was located in a separate warehouse and was not damaged by the fire.
Walnut Shop now is attempting to determine the cost of the inventory destroyed in the fire from the following information:
$\begin{array}{|l|r|}\hline \text { Net sales during 2013, through 8 February } & \$ 4,500,000 \\\hline \text { Ending inventory, 31 December 2012 } & \$ 1,300,000 \\\hline \text { Purchases in 2013 through 8 February } & \$ 2,250,000 \\\hline \text { Historical rate of gross profit } & 45 \% \\\hline\end{array}$ Compute the following (show computations):
(a) The cost of goods available for sale through 8 February.
(b) The cost of goods sold in 2013 through 8 February.
(c) The estimated total inventory on hand 8 February, prior to the fire.
(d) The cost of the inventory lost in the fire.