Question

Blossom uses the conventional retail method to determine its ending inventory at cost. Assume the beginning inventory at cost (retail) were $377000 ($581000), purchases during the current year at cost (retail) were $1795000 ($3040000), freight-in on these purchases totaled $116000, sales during the current year totaled $2740000, and net markups (markdowns) were $59000 ($95000). What is the ending inventory value at cost? Hint: Round intermediate calculation to 3 decimal places, e.g. 0.635 and final answer to 0 decimal places.

a. $547982.

b. $845000.

c. $525590.

d. $597742.

Answer 1

	Cost	Retail	Cost to retail percentage
Beginning inventory	$ 377,000	$ 581,000
Add: Net Purchases	$ 1,795,000	$ 3,040,000
Add: Freight-in	$ 116,000
Net markups		$ 59,000
	$ 2,288,000	$ 3,680,000	62.174% [$2,288,000/$3,680,000]
(Less): Markdowns		($ 95,000)
Goods available for sale		$ 3,585,000
Net sales		($ 2,740,000)
Estimated ending inventory at retail		$ 845,000
Estimated ending inventory at cost [$845,000 x 62.174%]	$ 525,370

*Ending inventory at retail : $845,000

*Ending inventory at cost : 525,370