Question

Tamarisk Inc. uses the retail inventory method to estimate ending inventory for its monthly financial statements. The following data pertain to a single department for the month of October 2018. Inventory, October 1, 2018 At cost $51,000 At retail 79,100 Purchases (exclusive of freight and returns) At cost 273,116 At retail 429,400 Freight-in 16,600 Purchase returns At cost 5,700 At retail 8,100 Markups 9,200 Markup cancellations 2,000 Markdowns (net) 3,700 Normal spoilage and breakage 10,200 Sales revenue 390,300 (a) Using the conventional retail method, prepare a schedule computing estimated lower-of-cost-or-market inventory for October 31, 2018. (Round ratios for computational purposes to 0 decimal places, e.g 78% and final answer to 0 decimal places, e.g. 28,987.)

Answer 1

Particulars	Cost		Retail
Beginning inventory	$51,000		$79,100
Purchases	$273,116		$429,400
Purchase returns	($5,700)		($8,100)
Freight in	$17,000
Totals	$335,416		$500,400
Markups		$9,200
Markup cancellations		($2,000)	$7,200
Totals	$335,416		$493,200
Markdowns			($3,700)
Normal spoilage and breakage			($10,200)
Sales revenue			($390,300)
Total			$89,000

Cost to retail ratio = $335,416/$493,200 = 68%

Ending inventory at lower of cost or market = $89,000*68%

=> 60,520

answered by: anonymous