(Gross Profit Method) Cast leaving 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 |
$170,000 |
Sales |
$650,000 |
|
Purchases for the year |
450,000 |
Sales returns |
24,000 |
|
Purchase returns |
30,000 |
Rate of gross profi t on net sales |
30% |
Merchandise with a selling price of $21,000 remained undamaged after the fire. Damaged merchandise with an original selling price of $15,000 had a net realizable value of $5,300.
Instructions
Compute the amount of the loss as a result of the fire, assuming that the corporation had no insurance coverage.