Assume Thompson Company, a copy center, lost some inventory in a fire. To file an insurance claim, Thompson Company must estimate its inventory by the gross profit method. Assume that for the past two years that Thompson Company’s gross profit has averaged 41% of net sales. Suppose the Thompson Company’s inventory records reveal the following data:
Inventory, October 1................ $ 57,100
Transactions during October:
Purchases ................................. 490,200
Purchase discounts ................... 11,000
Purchase returns....................... 70,900
Sales......................................... 667,000
Sales returns............................. 11,000

Requirements
1. Estimate the cost of the lost inventory, using the gross profit method.
2. Prepare the October income statement for this product through gross profit. Show the detailed computations of cost of goods sold in a separate schedule.