A fire destroyed a warehouse of the Goren Group, Inc., on May 4, 2016. Accounting records on that date indicated the following:
Merchandise inventory, January 1, 2016$1,920,000 Purchases to date 5,820,000 Freight-in 420,000 Sales to date 8,400,000
The gross profit ratio has averaged 20% of sales for the past four years.
Required: Use the gross profit method to estimate the cost of the inventory destroyed in the fire.