Question

Multiple Choice Question 110

Ivanhoe uses the conventional retail method to determine its ending inventory at cost. Assume the beginning inventory at cost (retail) were $380000 ($584000), purchases during the current year at cost (retail) were $1855000 ($3100000), freight-in on these purchases totaled $119000, sales during the current year totaled $2800000, and net markups (markdowns) were $62000 ($98000). 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.

$848000.

$532544.

$555152.

$607276.

A machine cost $1211000, has annual depreciation of $195000, and has accumulated depreciation of $952000 on December 31, 2017. On April 1, 2018, when the machine has a fair value of $273000, it is exchanged for a machine with a fair value of $1352000 and the proper amount of cash is paid. The exchange had commercial substance.

The gain to be recorded on the exchange is

$141000

$62750

$0

$64000

Answer 1

	Cost		Retail
Beginning Inventory	380,000		584,000
Purchases	1,855,000		3,100,000
Freight-in	119,000
Merchandise available for sale	2,354,000		3,684,000
Add: Markups			62,000
Totals	2,354,000		3,746,000
Cost of retail ratio		62.84%
Less: Markdowns			(98,000)
Less: Net sales			(2,800,000)
Ending Inventory at Retail			848,000

Ending inventory at retail = 848,000

Cost to retail ratio = 62.8%

Ending inventory at cost = 848,000*62.8%

= 532,544

Therefore, Option 532,544 is correct.