Question

Lacy's Linen Mart uses the average cost retail method to estimate inventories. Data for the first six months of 2021 include: beginning inventory at cost and retail were $88,500 and $139,000, net purchases at cost and retail were $331,000 and $499,000, and sales during the first six months totaled $509,000. The estimated inventory at June 30, 2021, would be:

Answer 1

Cost of Goods available for sale = Beginning inventory + Net purchases

Cost = 88,500 + 331,000 = 419,500

Retail = 139,000 + 499,000 = 638,000

Cost to retail percent = 419,500/638,000 = 65.75%

Estimated ending inventory at retail = Cost of Goods available for sale at retail - Sales

= 638,000 - 509,000 = 129,000

Estimated ending inventory at cost = 129,000*65.75%

= 84,818

(Please note that I have rounded the percentage in the calculation. If your answer doesn't match, please comment. So that we can adjust the percentage)

Thank you :)

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