The Cherry Department Store uses the average cost retail inventory method to det
ID: 2559852 • Letter: T
Question
The Cherry Department Store uses the average cost retail inventory method to determine its ending inventory. The accounting records for the current year for Cherry contained the following information:
Cost
Retail
Purchases
$61,200
$85,000
Beginning inventory
15,895
25,000
Sales
75,700
Net markups
7,500
Net markdowns
2,500
In addition, the accounting records for Cherry disclosed that purchases returns at cost and retail were $1,900 and $3,600, respectively. What is the cost-to-retail percentage to be used for ending inventory calculations?
a.
66.6%
b.
67.5%
c.
68.0%
d.
69.0%
Cost
Retail
Purchases
$61,200
$85,000
Beginning inventory
15,895
25,000
Sales
75,700
Net markups
7,500
Net markdowns
2,500
Explanation / Answer
Cost Retail Beginning inventory 15,895 25,000 Add Purchases 61,200 85,000 less purchase returns -1,900 -3,600 add net markups 7,500 less net markdowns -2,500 75,195 111,400 cost to retail percentage 75,195 / 111,400 67.50% option b 67.50%