On March 24, 2015 Ahousat Inc. (Ahousat) suffered a flood that destroyed its entire inventory of Persian rugs. Ahousat uses a periodic inventory control system and as a result doesn’t keep track of the amount of inventory that has been sold. Ahousat last counted its inventory on December 31, 2014, its year-end. At that time there was $1,800,000 of inventory on hand. Ahousat’s records indicate that sales from January 1 to March 24, 2015 were $1,480,000 and that during that time additional inventory was purchased for $1,300,000. Ahousat’s usual gross margin on its sales of rugs is 60 percent.

Required:

Ahousat has insurance that covers it fully for the flood losses, except for a $50,000 deductible. Prepare a report to Ahousat’s management that computes the amount of the loss that should be claimed from the insurance company. Explain any factors that management should be aware of that would change the amount of the claim.