Question

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 1

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