Question

# Ivanhoe uses the conventional retail method to determine its ending inventory at cost. Assume the beginning...

Ivanhoe uses the conventional retail method to determine its ending inventory at cost. Assume the beginning inventory at cost (retail) were \$392000 (\$596000), purchases during the current year at cost (retail) were \$2095000 (\$3340000), freight-in on these purchases totaled \$131000, sales during the current year totaled \$3040000, and net markups (markdowns) were \$74000 (\$110000). What is the ending inventory value at cost? Hint: Round intermediate calculation to 3 decimal places, e.g. 0.635 and final answer to 0 decimal places.

 \$647123.
 \$585088.
 \$860000.
 \$561580.

 Answer: Particulars Cost Retail Beginning inventory \$ 392,000 \$ 596,000 Add: Purchases \$ 2,095,000 \$ 3,340,000 Add: Freight in \$ 131,000 Add: Net Markups \$ 74,000 Goods available for sale \$ 2,618,000 \$ 4,010,000 Cost-to-Retail percentage          = \$ 2,618,000 / \$ 4,010,000 0.653 Less: Net Markdowns (\$ 110,000) Less: Sales (\$ 3,040,000) Estimated Ending inventory at retail \$ 860,000 Estimated ending inventory at cost ( \$ 3,150,000 x 0.653) \$ 561,580 Option (d) is Correct