(Determining the amount of inventory on hand when a periodic inventory system is used, LO 1,7) On March 24, 2001 Enterprise Inc. (Enterprise) suffered a serious fire that destroyed its entire inventory of fine paper products. Enterprise uses a periodic inventory system and as a result does not keep track of the amount of inventory that has been removed from inventory. Enterprise last counted its inventory on December 31, 2000, its year end. At that time there was $450,000 of inventory on hand. Enterprise’s records indicate that sales from January 1 to March 24, 2001 were $370,000 and that during that time additional inventory was purchased for $325,000. Enterprise’s usual gross margin on its sales of fine paper is 45%.

Required:

Enterprise has insurance that covers it fully for losses suffered by fire, except for a

$50,000 deductible. Prepare a report to Enterprise’s management that computes the amount of the loss that should be claimed from the insurance company as a result of the fire. Explain any factors that management should be aware of that would change the amount of the claim. ;