Question:
Calabro Inc. had a majority of its inventory destroyed by a fire just prior to year-end. The company controller had kept the accounting records current and provided you with the following account balances.
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Beginning Inventory
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$ 67,500
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Purchases for the year
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$ 235,700
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Purchase Returns
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$ 17,500
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Sales
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$ 526,800
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Sales returns
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$ 16,200
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Gross profit rate on sales
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36%
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Inventory with a selling price of $18,000 was undamaged by the fire. Damaged inventory with an original selling price of $10,000 had a net realizable value of $4,800.
Instructions:
Compute the amount of the loss caused by the fire, assuming no insurance coverage is carried by the company.