Question - Northstar Sales Corp. was organized on January 1, 2010. On December 31, 2011, the company lost most of its inventory in a warehouse fire just before the year-end count of inventory was to take place. Data from the records disclosed the following:
2010 2011
Inventory, January 1 .............$ 0 $ 173,120
Purchases during year ............ 860,000 692,000
Purchase returns and allowances during year........... 46,120 64,600
Sales during year .................788,000 836,000
Sales returns and allowances during year ....... 16,000 20,000
On January 1, 2011, Northstar's pricing policy was changed so that the gross profit rate would be 3 percentage points higher than the one earned in 2010.
Salvaged undamaged merchandise was marked to sell at $24,000, while damaged merchandise marked to sell at $16,000 had an estimated net realizable value of $3,600.
Determine the company's inventory loss due to the fire that occurred on December 31, 2011.