A fire destroyed the Churchill Company's warehouse on March 15, 2014. Only goods with a normal selling price of $12,500 and a net realizable value of $5,000 were saved. The following information is available from the company's records:
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Inventory in warehouse, 1/1/14
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$250,000
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Purchases, 1/1/14-3/15/14
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620,000
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Purchase returns
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9,500
|
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Freight-in
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14,000
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Sales, 1/1/13-3/15/14
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850,000
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Sales returns
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20,000
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For the period from 2009 through 2013, Churchill had a gross profit of $2,100,000 on net sales of $6,000,000.
Required:
Estimate Churchill's inventory loss from the fire using the gross profit method.