P9-4B (Gross Profit Method) Higgs Company lost most of its inventory in a fire in November just before the year-end physical inventory was taken. Corporate records disclose the following.

Inventory (beginning) $186,000 Sales $863,000

Purchases 667,000 Sales returns 64,000

Purchase returns 46,000 Gross profit t % based 25%

On net selling price

Merchandise with a selling price of $65,000 remained undamaged after the fire, and damaged merchandise has a salvage value of $26,400. The company does not carry fire insurance on its inventory.

Instructions

Prepare a formal labeled schedule computing the fire loss incurred. (Do not use the retail inventory method.)