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	$	21,400	$	38,600
Net purchases		10,700		?
Net markups				8,500
Net markdowns				2,500
Net sales				?

The company used the average cost flow method and estimated inventory at the end of September to be $17,120.00. 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

Answer :

Cost to retail % = 50%

Goods available at retail = $10,700 × 100/50 = $21,400

Step 1 :

Calculation of net purchases at retail

Particulars	Amount
Goods available at retail	21,400
Less : Markups	(8,500)
Add: Mark down	2,500
Net purchases at retail	15,400

Step 2 : calculation of net sales

Particulars	cost	retail
Beginning inventory	21,400	38,600
Add : purchases	10,700	15,400
Add: net markup		8,500
Less : net markdown		(2,500)
	32,100	60,000
Net sales(balancing figure)		(28,000)
Ending inventory (17,120 /53.5%)		32,000

Note : Cost to retail = 32,100 / 60,000 = 53.5%