Gross Profit Method Eastman Company lost most of its inventory in a fire in December just before

Question:

Gross Profit Method Eastman Company lost most of its inventory in a fire in December just before the year-end physical inventory was taken. Corporate records disclose the following.

$ 80,000 Inventory (beginning) Sales $415,000 Sales returms 21,000 Gross profit % based on Purchases 290,000 Purchase re

Merchandise with a selling price of $30,000 remained undamaged after the fire, and damaged merchandise has a salvage value of $8,150. The company does not carry fire insurance on its inventory. Prepare a formal labeled schedule computing the fire loss incurred. (Do not use the retail inventory method.)

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...