Gross Profit Method: Estimation of Flood Loss On November 21, 2016, a flood at Hodge Company's warehouse caused severe damage to its entire inventory of Product Tex. Hodge estimates that all usable damaged goods can be sold for $10,200. The following information was available from Hodge's accounting records for Product Tex: Based on recent history, Hodge had a gross margin (profit) on Product Tex of 25% of net sales. Required: 1. Prepare a schedule to calculate the estimated loss on the inventory in the flood, using the gross profit method. 1. Prepare a schedule to calculate the estimated loss on the inventory in the flood, using the gross profit method. HODGE COMPANY 2. The gross profit method may not provide an accurate estimate of ending inventory when: Add: Estimated gross margin (profit) Cash Cost of goods available for sale Estimated cost of goods sold Estimated cost of inventory at date of flood Estimated loss on inventory in the flood Inventory at November 1, 2016 Net sales from November 1, 2016, to date of flood Less: Estimated gross margin (profit) Less: Salvage goods Purchases from November 1,2016 , to date of flood