Question

Adams Corporation uses a periodic inventory system and the retail inventory method to estimate ending inventory and cost of goods sold. The following data are available for the month of September 2021:

	Cost		Retail
Beginning inventory	$	29,000	$	46,000
Net purchases		14,500		?
Net markups				10,700
Net markdowns				2,700
Net sales				?

The company used the average cost flow method and estimated inventory at the end of September to be $24,998.00. If the company had used the LIFO cost flow method, the cost-to-retail percentage would have been 50%.

Required:
Compute net purchases at retail and net sales for the month of September using the information provided. (Do not round your intermediate calculations.)

Answer 1

Cost to retail % = 50%

Goods available at retail = 14500 * 100 / 50 = $29,000

Calculation of Net purchases at retail-

Goods available at retail	$29,000
Less: Markups	(10700)
Add: Marks down	2700
Net purchases at retail	$21,000

Calculation of Net sales-

Particulars	Cost ($)	Retail ($)
Beginning Inventory	29000	46000
Add: Purchases	14500	21000
Add: Net markup		10700
Less: Net markdown		(2700)
	43,500	75,000
Net sales (balancing fig.)		(31,900)
Ending Inventory		43,100

Cost to Retail % = 43500 / 75,000 = 58.0%

Estimated Inventory at Retail = 24998 / 58% = 43,100