E9-14B (Gross Profit Method) Wineview 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.

E9-14B (Gross Profit Method) Wineview 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                $210,000               Sales                                     $970,000

Purchases for the year            805,000               Sales returns                             71,000

Purchase returns                       15,000               Rate of gross margin on net sales 20%

Merchandise with a selling price of $51,000 remained undamaged after the fire. Damaged merchandise with an original selling price of $25,000 had a net realizable value of $2,500.

Instructions

Compute the amount of the loss as a result of the fire, assuming that the company had no insurance

coverage.