Reference no: EM132623320

Daisy's Clothing Ltd. (DCL) recently experienced a flood caused by a faulty sprinkler system that destroyed its entire clothing inventory. However, Arnold Spitz, DCL's manager, kept meticulous records about retail prices in the store. DCL's management needs to estimate the value of DCL's ending inventory to support its insurance claim.

The following information was taken from the accounting records and from records kept by Arnold up to the date of the flood:

                                                         Cost                                Retail

Beginning inventory                    $ 15,500                     $ 30,000

Purchases                                  452,000                      902,000

Purchase returns                              22,000                    45,000

Additional markups                               -                         12,000

Markdowns                                          -                       5,000

Sales                                                    -                    820,000

Required:

Problem 1: Using the retail method of estimating inventory, calculate the amount of the insurance claim for the flood loss.