Blossom Inc. uses the retail inventory method to estimate ending inventory for i

Question

Blossom Inc. uses the retail inventory method to estimate ending inventory for its monthly financial statements. The folloning data pertain to a single department for the month of October 2018. Inventory, October 1, 2018 At cost $52,900 79,200 At retail Purchases (exclusive of frelght and returns) At cost t retail 307,532 430,400 16,400 Freight-in Purchase returns 5,700 8,200 9,000 2,000 ,500 ,900 88,500 t cost At retail Markups Markup cancellations Markdowns (net) Normal spollage and breakage Sales revenue (a) Using the conventional retail method, prepare a schedule computing estimated lower-of.cost-or-market inventory for October 31, 2018. (Round ratios for computational purposes to O decinal places, e.g 78% and final answer to 0 decinal places, eg. 28.987.) Ending inventory at lower-of-cost-or-market

Explanation / Answer

At cost At retail Beginning inventory $     52,900.00 $    79,200.00 Add:- Purchase $   307,532.00 $ 430,400.00 Less:- purcase returns $      (5,700.00) $     (8,200.00) Add:-Freight-in $     16,400.00 Total $   371,132.00 $ 501,400.00 Add:- Net markups Markups $      9,000.00 Less:- Markup cacellations $     (2,000.00) Deduct :- Markdowns $     (3,500.00) Totals $   371,132.00 $ 504,900.00 Inventory losses $     (9,900.00) Sales price of goods available for sale $ 495,000.00 Less:- sales revenue $(388,500.00) Ending inventory at retail $ 106,500.00 Cost to retail ratio* 74% Ending inventory at cost(106,500 * 74%) $    78,810.00 So the ending inventory at lower of cost- or - market is $78,810 *Cost to retail ratio = Amoun at cost / Amount at retail = 371,132 /504,900*100 = 74%

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