(Learning Objectives 4, 5: Compute gross profit; estimate inventory using the grossprofit method) Cleveland Company, a camera store, lost some inventory in a fire on October15. To file an insurance claim, the company must estimate its October 15 inventory using thegross profit method. For the past two years, Cleveland Company’s gross profit has averaged41% of net sales. Its inventory records reveal the following data:Inventory, October 1................ $ 57,700Transactions October 1–15:Purchases ................................. 490,800Purchase discounts................... 17,000Purchase returns....................... 70,900Sales......................................... 660,000Requirements1. Estimate the cost of the lost inventory using the gross profit method.2. Prepare the income statement for October 1 to October 15 for this product through grossprofit. Show the detailed computations of cost of goods sold in a separate schedule.
(Learning Objectives 4, 5: Compute gross profit; estimate inventory using the gross
profit method) Cleveland Company, a camera store, lost some inventory in a fire on October
15. To file an insurance claim, the company must estimate its October 15 inventory using the
gross profit method. For the past two years, Cleveland Company’s gross profit has averaged
41% of net sales. Its inventory records reveal the following data:
Inventory, October 1................ $ 57,700
Transactions October 1–15:
Purchases ................................. 490,800
Purchase discounts................... 17,000
Purchase returns....................... 70,900
Sales......................................... 660,000
Requirements
1. Estimate the cost of the lost inventory using the gross profit method.
2. Prepare the income statement for October 1 to October 15 for this product through gross
profit. Show the detailed computations of cost of goods sold in a separate schedule.
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