On December 5, 2015, a Tornado destroyed the merchandise inventory of Tractor Supply Company. In a concrete floor safe were the company's records with the following information:

Tractor Supply Company

Trial Balance

September 30, 2015

Debit Credit

Cash . . . . . . . . . . . . . . . $99,577

Accounts Receivable. . . . . . . . 42,444

Inventory, December 31, 2014 . . . 99,370

Equipment. . . . . . . . . . . . . 78,500

Accumulated Depreciation . . . . . $ 21,360

Accounts Payable to Suppliers. . . 29,450

Other Current Liabilities. . . . . 1,477

Common Stock . . . . . . . . . . . 50,000

Retained Earnings. . . . . . . . . 85,391

Sales. . . . . . . . . . . . . . . 527,925

Sales Returns and Allowances . . . 12,800

Purchases. . . . . . . . . . . . . 332,865

Purchase Returns and Allowances. . 1,675

Sales and Administrative Expenses. 41,937

Other General Expenses . . . . . . 9,785 _______

$717,278 $717,278

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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 5^th of $98,777.These unrecorded liabilities pertained to shipments in October totaling $50,467, shipments in November of $41,310, and $5,000 for shipments in transit on December 5^th shipped FOB Destination and $2,000 for shipments in transit FOB Shipping Point.

2. Customers of the company have acknowledged indebtedness of $133,675 as of December 5^th.Based on no responses from several other customers, the company estimated that customers, who have not responded, owe approximately $10,000. Finally, based on past experience, it is estimated that 3.50% of accounts receivable will be uncollectible.

3. Bank statements and the canceled checks enclosed with the statements for October, November and through December 5^th, revealed the following:

October November December

Disbursement Activity

Payments on Accounts Payable

Existing at September 30th $16,340 $13,110 $--

Payments for October

Inventory Shipments 19,870 17,465 8,100

Payments for November

Inventory Shipments -- 20,750 3,100

Payments for December

Inventory Shipments -- -- 800

Deposit Activity

Received on Account

From Customers 14,970 18,225 3,175

Refund From Vendor For

Merchandise Returned on

November 30, 2014 -- -- 2,190

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 2014 and 2013:

For The Years Ended

December 31

2014 2013

Sales $654,970 $716,445

Sales Returns and Allowances 6,158 4,167

Beginning Inventory 57,569 50,345

Purchases 319,968 341,977

Purchase Returns and Allowances 1,005 875

Ending Inventory 99,370 57,965

Required

a. Prepare the set of schedules that show the amount of the inventory loss from the flood.

b. Do you think the insurance company's approach is fair?

If yes, why?If not, why not? Show supporting calculations.