Question

Shwartz Co. uses the retail inventory method. The following information is available for the current year.

		Cost		Retail
Beginning inventory		$ 306000		$482000
Purchases		1120000		1600000
Freight-in		17000		0
Employee discounts		0		7400
Net markups		0		54000
Net markdowns		0		74000
Sales revenue		0		1500000

If the ending inventory is to be valued at approximately lower of average cost or market, the calculation of the cost ratio should be based on cost and retail of

$1426000 and $2128600.

$1137000 and $1646600.

$1137000 and $1654000.

$1443000 and $2136000.

Answer 1

Particulars	Cost	Retail
Beginning inventory	$ 306,000	$ 482,000
Purchases	$ 1,120,000	$ 1,600,000
Add: Freight in	$ 17,000
Add: Net additional markups	-	$ 54,000
Goods available for sale	$ 1,443,000	$ 2,136,000
Cost to retail Ratio     = $ 1,443,000 / $ 2,136,000 = 70% (Approximately)
Less: Net markdoens		($ 74,000)
Less: Sales		($1,500,000)
Less: Employee discounts		($ 7,400)
Ending inventory at retail		$ 562,000
Option (d) is Correct