Question

The records of Indigo’s Boutique report the following data for the month of April.

Sales revenue		$100,800		Purchases (at cost)		$49,000
Sales returns		1,800		Purchases (at sales price)		86,500
Markups		10,300		Purchase returns (at cost)		1,800
Markup cancellations		1,500		Purchase returns (at sales price)		2,700
Markdowns		8,700		Beginning inventory (at cost)		31,880
Markdown cancellations		2,700		Beginning inventory (at sales price)		42,700
Freight on purchases		2,100

Compute the ending inventory by the conventional retail inventory method. (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 using conventional retail inventory method

Answer 1

	Cost price	Retail price
Beginning Inventory	$31,880	$42,700
Purchases	$47,200 ($49,000-$1,800)	$83,800 ($86,500-$2,700)
Freight-in	$2,100
Net Markups		$8,800 ($10,300-$1,500)
Totals	$81,180	$135,300

Cost to retail ratio = $81,180 / $135,300

= 60%

Retail price total	$135,300
Less : Net markdowns	$6,000 ($8,700-$2,700)
Total goods at retail	$129,300
Less : Sales	$99,000 ($100,800-$1,800)
Ending inventory at retail	$30,300

Ending inventory at costs = $30,300 * 60%

= $18,180