Cost Retail Inventory, 12/31/17 Purchases Purchase returns Purchase discounts Gr
ID: 2567784 • Letter: C
Question
Cost Retail Inventory, 12/31/17 Purchases Purchase returns Purchase discounts Gross sales revenue Sales returns Markups Markup cancellations Markdowns Markdown cancellations Freight-in Employee discounts granted Loss from breakage (normal) $246,800 886,480 60,200 17,800 $384,600 1,445,300 80,700 1,411,800 97,600 120,300 40,200 45,400 20,000 42,300 8,100 4,000 Assuming that Shamrock Inc. uses the conventional retail inventory method, compute the cost of its ending inventory at December 31, 2018. (Round ratios for computational purposes to 0 decimal places, e.g 78% and final answer to 0 decimal places, eg, 28,987) Ending inventory using the conventional retail inventory method 766020Explanation / Answer
1. Calculate the retail value of the goods available for sale
Retail value of goods available for sale = Retail value of opening inventory + Retail value of goods purchased.
= $384,600 + (1,445,300 - 80,700) = $1,749,200
2. Total sales during the period = $(1,411,800 - 97,600) = $1,314,200
3. Calculate total cost = Opening Inventory + cost of purchases
= $246,800 + (886,480 - 60,200) + 42,300 = $1,115,380
4. Cost to retail Percentage = $1,115,380 / 1,749,200 = 64% Approx.
5. Difference between Retail value of goods available for sale & Total sales during the period
= 1,749,200 - 1,314,200 = 435,000
6. Ending Inventory under retail inventory method = $435,000 x Cost retail percent(64%)
= $278,400
NOTE: In the given question, purchase discount is not considered for total cost since it is a cash discount received on payment to suupliers and therefore does not impact total cost. Moreover, markups and markdowns is the percent earned over the cost and therefore will not be considered for calculating the revenue as gross sales already includes and excludes both of them.