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.

Beginning inventory..............................................................

$ 67,200

Purchases 

$410,800

      Less: Purchase discounts.................................................

(15,000)

                  Purchase returns...................................................

  (10,600)

      Net purchases...................................................................

385,200

Cost of goods available.........................................................

452,400

Cost of goods sold:

      Sales revenue...................................................................

$695,000

          Less: Sales returns.......................................................

 (12,000)

      Net sales 

683,000

      Less: Estimated gross profit of 45%................................

(307,350)

      Estimated cost of goods sold..........................................

375,650

Estimated cost of ending inventory......................................

$76,750

Whitfield Company

Income Statement (partial)

Two Week Period Ending August 15 (date of the fire)

Sales revenue.............................................................................

$695,000

Less: Sales returns......................................................................

   (12,000)

       Net sales revenue................................................................

683,000

Cost of goods sold.....................................................................

375,650*

Gross profit................................................................................

$307,350

      Beginning inventory..........................................................................

$   67,200

      Purchases..........................................................

$410,800

      Less: Purchases discounts.................................

(15,000)

                  Purchase returns....................................

  (10,600)

       Net purchases...................................................................................

385,200

       Cost of goods available for sale.......................................................

452,400

       Less: Ending inventory....................................................................

 (76,750)

       Cost of goods sold...........................................................................

$375,650