Question

As of January 1, 2020, Bramble Inc. adopted the retail method of accounting for its merchandise inventory.

To prepare the store’s financial statements at June 30, 2020, 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 Bramble’s June 30, 2020, 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

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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		$6,600
Totals	$126,528	$197,700
Deduct: Net markdowns		$3,800
Sales price of goods available		$193,900
Deduct: Sales (net)		$144,200
Ending inventory at retail		$49,700
Cost-to-retail ratio	64%
($126,528/$197,700)
Inventory under the conventional retail method	$31,808
($49,700 x 64%)