Question

Raleigh Department Store uses the conventional retail method for the year ended December 31, 2016. Available information follows:

a) The inventory at January 1, 2016, had a retail value of $37,000 and a cost of $30,090 based on the conventional retail method.

	Cost			Retail
Gross purchases	$	177,030		$	410,000
Purchase returns		5,700			28,000
Purchase discounts		4,200
Gross sales					345,000
Sales returns					5,500
Employee discounts					3,000
Freight-in		29,500
Net markups					17,000
Net markdowns					28,000

Answer 1

Answer:-

Ending inventory using conventional retail inventory method= $167825

Explanation:-

Particulars	Cost		Retail
	$	$	$
Beginning Inventory	30090		37000
Purchases	177030		410000
Purchase returns	-5700
Purchase discounts	-4200
Freight-in	29500
Total	226720		447000
Add:- Net markups:			17000
	226720		464000
Less:-Net markdowns:			28000
Sales price of goods available			436000
Less:-Net sales		$345000-$5500	339500
Employees discounts			-3000
Ending inventory at retail			342500

Cost to retail ratio =($226720/$464000)*100 =49%

Ending inventory using conventional retail inventory method=$342500*49%

=$167825