Estimating Inventory Loss Using Gross Profit Method

On November 15, a fire destroyed Youngstown Inc.s warehouse where inventory is stored. It is estimated that $12,000 can be realized from sale of usable but damaged inventory. The accounting records concerning inventory reveal the following. Gross profit averaged 35% of net sales.

Inventory at Nov. 1	$144,000
Purchases from Nov. 1 to Nov. 15	168,000
Net sales from Nov. 1 to Nov. 15	240,000

Required a. Calculate the estimated loss of inventory using the gross profit method. $Answer b. Assume instead that the markup is 25% of cost. Estimate the loss of inventory using the gross profit method. $Answer