Problem:
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.
| Beginning Inventory |
$ 67,500 |
| Purchases for the year |
$ 235,700 |
| Purchase Returns |
$ 17,500 |
| Sales |
$ 526,800 |
| Sales returns |
$ 16,200 |
| Gross profit rate on sales |
36% |
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.
Required:
Question: Compute the amount of the loss caused by the fire, assuming no insurance coverage is carried by the company.
Note: Please show how you came up with the solution.