Question

Campbell Corporation uses the retail method to value its inventory. The following information is available for the year 2018:

	Cost			Retail
Merchandise inventory, January 1, 2018	$	250,000		$	286,000
Purchases		672,000			888,000
Freight-in		14,000
Net markups					26,000
Net markdowns					4,500
Net sales					860,000

Required:
Determine the December 31, 2018, inventory by applying the conventional retail method.

	Cost	Retail	Cost-to-Retail Ratio
Beginning inventory
Plus: Purchases
Freight-in
Net markups
Less: Net markdowns
Goods available for sale
Cost-to-retail percentage
Less: Net sales
Estimated ending inventory at retail
Estimated ending inventory at cost

Answer 1

Cost Retail Cost-to-Retail Ratio Beginning inventory $250,000 $286,000 Plus: Purchases 672,000 888,000 Freight-in 14,000 Net markups 26,000 936,000 1,200,000 Less: Net markdowns 4,500 Goods available for sale 1,195,000 Cost-to-retail percentage 0.78 Less: Net sales 860,000 Estimated ending inventory at retail 335,500 Estimated ending inventory at cost 261,690

Cost-to-retail percentage = 936,000 / 1,200,000 = 0.78
Estimated ending inventory at cost = 335,500 x 0.78 =