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On December 7, 2015, a storm destroyed merchandise inventory of Home Depot. The company's records with the following information.

Home Depot

Trial Balance

September 30, 2015

Debit Credit

Cash $99,577

Accounts Receivable 42,444

Inventory, Dec 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 & Allowances 12,800

Purchases 332,865

Purchases Returns & Allowances 1,675

Sales & Admin Expenses 41,937

Other General Expenses 9,785

$717,278 $717,278

Note: The company's 12-month fiscal year ends December 31st.

Through correspondence with suppliers, customers, and the bank, the following additional information has also been collected.

1. Correspondence with suppliers revealed unrecorded obligations at December 5 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 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.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 3.5% of accounts receivable will be uncollectible.
3. Bank Statements and the canceled checks enclosed with the statements for October, November, andthrough December 5, revealed the following:

Disbursement Activity October November December

Payments on Accounts Payable

Existing at Sept 30 $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 Acct from Customers 14,970 18,225 3,175

Refund From Vendor For

Merchandise Returned on 11/30/14. (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

Questions

1. What is are the journal entries, overall gross profit (2 years combined), COGS sold by year (2013/2014) and Sales by year (2013/204) to show the amount of the inventory loss.
2. Based on the schedules, is the insurance company's approach fair? Why or why not? Show calculations.

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