Gross Profit Method) Higgs Company lost most of its inventory in a fire in November just before the year-end physical inventory was taken. Corporate records disclose the following.
Inventory (beginning) $186,000 Sales $863,000
Purchases 667,000 Sales returns 64,000
Purchase returns 46,000 Gross profit t % based 25%
On net selling price
Merchandise with a selling price of $65,000 remained undamaged after the fire, and damaged merchandise has a salvage value of $26,400. The company does not carry fire insurance on its inventory.
Instructions
Prepare a formal labeled schedule computing the fire loss incurred. (Do not use the retail inventory method.)