P6-66A. (Learning Objectives 1, 4: Estimating inventory by the gross profit method; preparing the Income Statement) Assume Theon Company, a copy center, lost some inventory in a fire. To file an insurance claim, Theon Company must estimate its inventory by the gross profit method. Assume that for the past two years Theon Company’s gross profit has averaged 40% of net sales. Suppose the Theon Company’s inventory records reveal the following data:

Requirements 1. Estimate the cost of the lost inventory, using the gross profit method.
2. Prepare the October Income Statement for this product through gross profit. Show the detailed computations of cost of goods sold in a separate schedule.

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Inventory, October 1.................. $ 57,200 Transactions during October: Purchases....... 490,400 Purchase discounts ..................... 11,100 Purchase returns... 70,800 Sales........ 668,000 Sales returns.. 11,500