Assume Ross Company, a sporting goods store, lost some inventory in a fire. To file an insurance claim, Ross Company must estimate its ending inventory by the gross profit method. Assume that for the past two years, Ross Company’s gross profit has averaged 43% of net sales. Suppose Ross Company’s inventory records reveal the following data:
Inventory, January 1 ................ $ 57,500
Transactions during January:
Purchases ................................. 490,500
Purchase discounts ................... 12,000
Purchase returns....................... 70,300
Sales......................................... 664,000
Sales returns............................. 16,000

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