Question

Assume Whitfield Company, a camera store, lost some inventory in a fire on August 15. To file an insurance claim, Whitfield Company must estimate its August 15 inventory by the gross profit method. Assume that for the past two years Whitfield Company’s gross profit has averaged 45% of net sales. Suppose that Whitfield Company’s inventory records reveal the following data:
Inventory, August 1.................. $ 67,200
Transactions August 1–15:
Purchases ................................. 410,800
Purchase discounts................... 15,000
Purchase returns....................... 10,600
Sales......................................... 695,000
Sales returns............................. 12,000

Requirements
1. Estimate the cost of the lost inventory using the gross profit method.
2. Prepare the income statement for August 1 to August 15 for this product through gross profit. Show the detailed computations of cost of goods sold in a separate schedule.



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  • CreatedJuly 25, 2014
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