Question

Sunland 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 2021.

Inventory, October 1, 2021
At cost		$52,900
At retail		78,600
Purchases (exclusive of freight and returns)
At cost		283,025
At retail		425,100
Freight-in		16,400
Purchase returns
At cost		5,600
At retail		8,000
Markups		8,800
Markup cancellations		2,000
Markdowns (net)		3,500
Normal spoilage and breakage		9,800
Sales revenue		397,200

(a) Using the conventional retail method, prepare a schedule computing estimated lower-of-cost-or-market inventory for October 31, 2021. (Round ratios for computational purposes to 0 decimal places, e.g 78% and final answer to 0 decimal places, e.g. 28,987.)

Ending inventory at lower-of-cost-or-market

$

Answer 1

Answer :

	Cost	retail	cost to retail
Beginning inventory	52,900	78,600
Add : purchases	2,83,025	4,25,100
Add: Freight in	16,400
Less : purchase returns	(5,600)	(8,000)
Add: Net markups (8,800 - 2,000)		6,800
Goods available for sale	3,46,725	5,02,500
Cost to retail Percentage			69%
Less: Net sales		(3,97,200)
Less: Net markdowns		(3,500)
Less: Normal spoilage		(9,800)
Estimated ending inventory at retail		92,000
Estimated ending inventory at cost (92,000 × 69%)	$63,480