Samore, Inc., bills its only branch for merchandise shipments at a markup of 30% above home office cost. The branch sells the merchandise at a markup of 10% above billed price.

Shortly after the close of business on January 28, 2005, some of the branch merchandise was destroyed by fire. The following additional information is available:

a. Prepare a working paper to compute the estimated cost (to the home office) of the merchandise destroyed by fire at the branch of Samore, Inc., on January 28, 2005.

b. Prepare a journal entry for the branch to recognize the uninsured fire loss on January 28, 2005. Both the home office and the branch use the perpetual inventory system.

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Inventories, Jan. 1 (at billed prices from home office) Inventories, Jan. 28, of merchandise not destroyed (at selling prices) Shipments from home office from Jan. 1 to Jan. 28 (at billed prices) Sales from Jan. 1 to Jan. 28 Sales returns from Jan. 1 to Jan. 28 (merchandise actually returned) Sales allowances from Jan. 1 to Jan. 28 (price adjustments) $15,600 7,150 71,500 51,840 3,220 300