Question

Crane Pet supply uses the conventional retail method to determine its ending inventory at cost. Assume...

Crane Pet supply uses the conventional retail method to determine its ending inventory at cost. Assume the beginning inventory at cost (retail) were $795800 ($979700), purchases during the current year at cost (retail) were $3185800 ($4138300), freight-in on these purchases totaled $190700, sales during the current year totaled $4036000, and net markups (markdowns) were $5900 ($287900). What is the ending inventory value at cost?

Homework Answers

Answer #1
Cost Retail
Beginning inventory 795800 979700
Add: Purchases 3185800 4138300
Add: Freight-in 190700
Add: Mark-up 5900
Goods available for sale 4172300 5123900
Cost to retail ratio (4172300/5123900) 81.4%
Less: Sales -4036000
Less: Mark-down -287900
Ending inventory at retail 800000
Ending inventory at cost = Ending inventory at retail x Cost to retail ratio
Ending inventory at cost = 800000 x 81.4% = 651,200

Therefore, ending inventory value at cost is $651,200.

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