Chapter 6, Problem 6.66AP

LO 4, 5

(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.