QUESTION $2$

Reena Corp. lost most of its inventory in a fire in December, just before the year$-$end physical inventory was taken. The corporation's books disclosed the following:

Merchandise with a selling price of $$42,000$ remained undamaged after the fire. Damaged merchandise with an original selling price of $$30,000$ had a net realizable value of $$10,600.$

Instructions

a$)$ Calculate the amount lost because of the fire, assuming that the corporation had no insurance coverage.

b$)$ Prepare the journal entry to record the loss and account for the damaged inventory in a separate Damaged Inventory account. In the same entry, record cost of goods sold for the year ended December $31.$

c$)$ How would the loss be classified on the income statement of Reena?

d$)$ An icon reads, Digging Deeper. While the gross profit percentage has averaged $40\%$ over the past five years, it has been as high as $42\%$ and as low as $37\mathrm{.}5\%.$Given this information,

should a range of possible loss amounts be provided instead of a single figure? Explain.