Question

Marigold 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		$51,900
At retail		77,300
Purchases (exclusive of freight and returns)
At cost		268,222
At retail		425,400
Freight-in		16,500
Purchase returns
At cost		5,500
At retail		8,100
Markups		9,100
Markup cancellations		2,000
Markdowns (net)		3,600
Normal spoilage and breakage		9,900
Sales revenue		389,600

(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

	Cost	Retail	Cost-to-Retail ​Ratio
Beginning inventory	$ 51,900	$ 77,300
Add: Purchases	$ 268,222	$ 425,400
Add: Freight-in	$ 16,500
Less: Purchase returns	($ 5,500)	($ 8,100)
Add: Net markups                ( $ 9,100 (-) $ 2,000)		$ 7,100
Goods available for sale	$ 331,122	$ 501,700
Cost-to-retail percentage ( $ 331,122 / $ 501,700 )			66.00%
Less: Net sales		($ 389,600)
Less: Net markdowns		($ 3,600)
Less: Normal spoilage		($ 9,900)
Estimated ending inventory at retail		$ 98,600
Estimated ending inventory at cost ( $ 98,600 x 66% )	$ 65,076