Question

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

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

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

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