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: Credit Tractor Supply Company Trial Balance September 30, 2015 Debit Cash . . . . . . . . . . . . . $99,577 Accounts Receivable. . . . . . . . 42,444 Inventory, December 31, 2014 .. 99,370 Equipment. ......... 78,500 Accumulated Depreciation .... Accounts Payable to Suppliers.. Other Current Liabilities. ... Common Stock . . . . . . . . . . Retained Earnings. . . . . . . . Sales. . . . . . . . . . . . . . Sales Returns and Allowances ... 12,800 Purchases....... 332,865 Purchase Returns and Allowances. . Sales and Administrative Expenses. 41,937 Other General Expenses ...... 9,785 $717, 278 $ 21, 360 29,450 1,477 50,000 85, 391 527,925 1,675 $717,278 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 5of $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 5th 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 5th. 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 5th, 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 a 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. 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: Credit Tractor Supply Company Trial Balance September 30, 2015 Debit Cash . . . . . . . . . . . . . $99,577 Accounts Receivable. . . . . . . . 42,444 Inventory, December 31, 2014 .. 99,370 Equipment. ......... 78,500 Accumulated Depreciation .... Accounts Payable to Suppliers.. Other Current Liabilities. ... Common Stock . . . . . . . . . . Retained Earnings. . . . . . . . Sales. . . . . . . . . . . . . . Sales Returns and Allowances ... 12,800 Purchases....... 332,865 Purchase Returns and Allowances. . Sales and Administrative Expenses. 41,937 Other General Expenses ...... 9,785 $717, 278 $ 21, 360 29,450 1,477 50,000 85, 391 527,925 1,675 $717,278 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 5of $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 5th 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 5th. 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 5th, 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 a 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