Question

Estimating Ending Inventory REST, Inc. maintains a large warehouse for storing inventory. Unfortunately, the warehouse and...

Estimating Ending Inventory

REST, Inc. maintains a large warehouse for storing inventory. Unfortunately, the warehouse and all of its contents were badly damaged due to a fire started by an employee who had recently been laid off. Fortunately for the company, the local fire department was able to put out the fire before all of the inventory was lost.

You have been asked to use company records to determine the amount of merchandise lost in the fire. The following information is from the main office records: NOTE: Please round all of your percentage calculations to the nearest 1%. For example, .167 (16.7%) would be rounded to .17 (17%).

Cost

Retail

Beginning Inv.

$950,000

$2,536,500

Purchases

$4,987,500

$13,665,750

Purchase Discount

$74,813

$187,031

Purchase Returns

$124,688

$361,594

Freight-in

$498,750

Markups

$1,425,000

Markdown cancellations

$1,140,000

Markdowns

$2,850,000

Employee discounts

$17,100

Sales (net)

$10,925,000

Average Cost Markup

200%

Cost of inventory still on hand and undamaged:

$526,300

Using the Retail Inventory Method (RIM), what was REST’s Ending Inventory at Retail value before the fire?

Homework Answers

Answer #1

Inventory Lost In Fire     =

Ending Inventory less Cost of Inventory still on hand & undamaged

                                                = $ 1637814 - $ 526300
                                                = $ 11,11,514.00
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