Assume Sternberg Company, a music store, lost some inventory in a fire on March 15. To file an insurance claim, Sternberg Company must estimate its March 15 inventory by the gross profit method. Assume that for the past two years, Sternberg Company’s gross profit has averaged 44% of net sales. Suppose Sternberg Company’s inventory records reveal the following data:
Inventory, March 1.................. $ 67,300
Transactions March 1-15:
Purchases ................................. 410,700
Purchase discounts................... 17,000
Purchase returns....................... 10,500
Sales......................................... 690,000
Sales returns............................. 13,000
Requirements
1. Estimate the cost of the lost inventory using the gross profit method.
2. Prepare the income statement for March 1 through March 15 for this product through gross profit. Show the detailed computation of cost of goods sold in a separate schedule.