Reference no: EM131652309

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.