Question

Problem 9-12

As of January 1, 2017, Swifty Inc. adopted the retail method of accounting for its merchandise inventory.

To prepare the store’s financial statements at June 30, 2017, you obtain the following data.

		Cost			Selling Price
Inventory, January 1		$33,000			$42,800
Markdowns					9,800
Markups					9,800
Markdown cancellations					6,000
Markup cancellations					3,200
Purchases		96,328			152,400
Sales revenue					151,900
Purchase returns		2,800			4,100
Sales returns and allowances					7,700

Compute Swifty’s June 30, 2017, inventory under the conventional retail method of accounting for inventories. (Round ratios for computational purposes to 0 decimal places, e.g. 78% and final answer to 0 decimal places, e.g. 28,987.)

Inventory under the conventional retail method

$

Answer 1

Conventional Retail Method
	Cost	Retail
Inventory, January 1,	$33,000	$42,800
Purchases (net)	$93,528	$148,300
	$126,528	$191,100
Add: Net markups		$9,800
Totals	$126,528	$200,900
Deduct: Net markdowns		$3,800
Sales price of goods available		$197,100
Deduct: Sales (net)		$144,700
Ending inventory at retail		$52,400
Cost-to-retail ratio	62.98%
($126,528/$200,900)
Ending inventory at cost	$33,002
($52,400 x 62.98%)