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.)