Headstrong Hardware lost most of its inventory in an electrical fire that destroyed the company’s warehouse and retail store in 2020. Fortunately, the accounting records were backed up on the owner’s computer in her home office and could, therefore, be recovered. However, Headstrong uses the periodic inventory system. Therefore, it could not determine the amount of inventory that was lost in the fire because the inventory was destroyed. Headstrong’s insurance company requires Headstrong to prepare a reasonable estimate of the lost inventory before it can process the insurance claim.

You are Headstrong’s accountant. You review the accounting records for 2019 and 2020 (to the date of the fire) and obtain the following information:

1. Sales in 2019 were $963,000.

2. Sales in 2020 up to the time of the fire amounted to $678,000.

3. Cost of goods sold in 2019 was $597,060.

4. 2020 inventory purchased to the date of the fire totalled $486,000.

5. The ending inventory reported on the 2019 statement of financial position was $88,000.

Required

Prepare an estimate of the amount of inventory lost in the fire.