Question - Sarasota Company lost most of its inventory in a fire in December just before the year-end physical inventory was taken. The corporation's books disclosed the following.
Beginning inventory $179,500
Sales revenue $640,200
Purchases for the year 402,500
Sales returns 25,800
Purchase returns 31,500
Rate of gross profit on net sales 20%
Merchandise with a selling price of $21,200 remained undamaged after the fire. Damaged merchandise with an original selling price of $15,800 had a net realizable value of $5,700.
Compute the amount of the loss as a result of the fire, assuming that the corporation had no insurance coverage.