When Janet Chiu arrived at her shop on the morning of 15 June 20X3, she found that thieves had broken in overnight and stolen much of her merchandise. The agent of Alright Insurance Company agreed to visit in the afternoon and promised the insurance company would cover the cost of the goods stolen, but first Janet had to verify that amount of the loss. Janet took a physical inventory of the merchandise not stolen and determined that the cost was \(\$ 2000\). Janet needs to make an estimate of the loss so that she can collect the insurance money and buy new merchandise. She asks for your help, and you agree to look at her accounting records. She tells you that the store has been in business since 1 January 2007, and that she does not use the retail method of accounting for inventory. You obtain the following information:

Required: Make a recommendation to Janet on the amount she should settle for with the insurance company? What is the major assumption underlying your answer?

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Inventory, January 1, 20X2 Purchases, 20X2 Purchases, 20X3 Sales (net), 20X2 Sales (net), 20X3 Purchases returns, 20X2 Purchases returns, 20X3 Inventory, January 1, 20X3 Physical inventory after theft June 15 20X3 $ 7000 49 000 33 000 80 000 50 000 4000 2500 16 000 2000