Presented below is information related to Skysong Inc. Cost Retail Inventory, 12

Question

Presented below is information related to Skysong Inc. Cost Retail Inventory, 12/31/17 $251,300 $387,300 Purchases 962,468 1,455,600 Purchase returns 58,800 78,800 Purchase discounts 18,000 — Gross sales revenue — 1,421,800 Sales returns — 98,300 Markups — 117,600 Markup cancellations — 40,500 Markdowns — 45,700 Markdown cancellations — 20,200 Freight-in 41,400 — Employee discounts granted — 7,900 Loss from breakage (normal) — 4,500 Assuming that Skysong Inc. uses the conventional retail inventory method, compute the cost of its ending inventory at December 31, 2018.

Explanation / Answer

Part 1 - Calculation of inventory under Conventional retail method

$885668

($962468-$58800-$18000)

$1376800

($1455600 - $78800)

COST TO RETAIL PERCENTAGE =

(Cost of goods available /Original retail price of goods available, plus net markups)*100

= ($1178365/$1841200)*100 = 64%

Estimated theft and Loss From Breakage

($7900+$4500)

Particulars Cost Retail Inventory as on 31 December 2017 $251300 $387300 Net Purchases

$885668

($962468-$58800-$18000)

$1376800

($1455600 - $78800)

Freight In $41400 Add : Net markups ($117600 - $40500) $77100 Totals $1178365 $1841200 (Cost of goods available) (Original retail price of goods available + net markups)

COST TO RETAIL PERCENTAGE =

(Cost of goods available /Original retail price of goods available, plus net markups)*100

= ($1178365/$1841200)*100 = 64%

Less : net mark downs ($45700 - $20200) $25500 Cost of goods available for sale $1815700 Net sales ($1421800-$98300) $1323500

Estimated theft and Loss From Breakage

($7900+$4500)

$12400 Estimated ending Inventory at retail $479800 Estimated ending Inventory = ($479800*64%) = $307072

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