Assume Watertown Company, a camera store, lost some inventory in a re on March 15. To le an insurance claim, Watertown Company must estimate its

Assume Watertown Company, a camera store, lost some inventory in a fire on March 15. To file an insurance claim, Watertown Company must estimate its March 15 inventory by the gross profit method. Assume that for the past two years Watertown Company’s gross profit has averaged 39% of net sales. Suppose that Watertown 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 Income Statement for March 1 to March 15 for this product through gross profit. Show the detailed computations of cost of goods sold in a separate schedule.

Inventory, March 1.......... Transactions March 1-15: Purchases........ Purchase discounts. Purchase returns. Sales. $ 57,400 490,300 11,000 70,800 647,000