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#S On December 5, 2019, a hurricane destroyed the merchandise inventory of the Key West Music Company. In a waterproof secure safe were the company's records with the following information: Key West Music Company Trial Balance September 30, 2019 Cash. Accounts Receivable. Inventory, December 31, 2018 Equipment. Accumulated Depreciation Accounts Payable to Suppliers. Other Current Liabilities. Common Stock Retained Earnings. Sales. Debit $315,325 Credit 36,888 129,226 200,975 $ 32,670 31,908 2,000 60,000 41,482 1,246, 624 Sales Returns and Allowances 17,900 Purchases. 546, 930 Purchase Returns and Allowances. 3,582 Sales and Administrative Expenses. 50,657 Other General Expenses 120,565 $1,418,266 $1,418,266 Note: The Company's 12 month fiscal year ends December 31st. Through correspondence with suppliers, customers, the bank, etc. the following additional information has also been collected: 1. Correspondence with suppliers revealed unrecorded obligations at December 5th of $120,734. These unrecorded liabilities pertained to shipments in October totaling $58, 365, shipments in November of $50, 635, and $10,000 for shipments still in transit on December 5th shipped FOB Destination, and also $1,734 for shipments still in transit FOB Shipping Point. 2. Customers of the company have acknowledged indebtedness of $94,950 as of December 5th. Based on no responses from several other customers, the company estimated that customers, who have not responded, owe approximately $12, 650. Finally, based on past experience, it is estimated that 2.25% of accounts receivable will be uncollectible. Additional Information Continues on the Next Page 3. Bank statements and the canceled checks enclosed with the statements for October, November and through December 5th, revealed the following: December October November Disbursement Activity Payments on Accounts Payable Existing at September 30th $19,650 $12,258 $ Payments for October Inventory Shipments Payments for November Inventory Shipments Payments for December Inventory Shipments Deposit Activity Received on Account From Customers Refund from Vendor For Merchandise Returned on August 31, 2019 11,650 21,460 10,695 25,870 4,732 12,635 18,125 14,330 2,224 3,950* *This refund was delayed until December 2, 2019 because the supplier had lost the claim submitted by Key West Music Company. 4. The insurance company is proposing a settlement of the company's claim based on the overall gross profit for the most recent two fiscal years. Scheduled below is information obtained from prior financial statements covering 2018 and 2017: For The Years Ended December 31st 2018 Sales $671,108 Sales Returns and Allowances 5,761 Beginning Inventory 57,569 Purchases 319,968 Purchase Returns and Allowances 1,235 Ending Inventory 129,226 2017 $709,335 6,985 50,345 341,977 916 57,569 Required a. Determine the amount of inventory loss from the hurricane. b. Do you feel the insurance company's approach is fair? Explain in detail with supporting calculations

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