Question

Windsor Inc. uses the retail inventory method to estimate ending inventory for its monthly financial statements....

Windsor 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 2018.

Inventory, October 1, 2018
    At cost $52,700
    At retail 77,400
Purchases (exclusive of freight and returns)
    At cost 306,656
    At retail 430,500
Freight-in 16,500
Purchase returns
    At cost 5,600
    At retail 8,000
Markups 9,200
Markup cancellations 1,900
Markdowns (net) 3,700
Normal spoilage and breakage 10,000
Sales revenue 394,500

What is inventory at lower of cost or market

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Answer #1
Calculation of inventory by using Lower of cost or market
Particulars Cost Retail
Inventory at begninng 52700 77400
add: purchase 306656 430500
less: purchase return -5600 -8000
add: Freight in 16500
add: Net markup (9200-1900) 7300
Goods avilable for sale 370256 507200
less: net markdown -3700
Goods availble for sale 370256 503500
less: normal spoilage -10000
net sale -394500
estimated inventory at the end at retail 99000
estimated inventory at the end at cost (72270)
cost to retail percentage = goods available for sale at cost/goods available for sale at retail
Cost to retail % = 370256/507200 = 73%
estimated ending inventory at cost = 99000*73% = 72270
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