Question

Boynton Beachwear Inc. had beginning inventory of $40,000 at cost and $48,000 at retail. Net purchases were $210,000 at cost and $244,000 at retail. Net markups were $6,000, net markdowns were $18,000, and sales revenue was $230,000.

Compute ending inventory at cost using the conventional retail method.

Answer 1

Answer: $42,000

Calculations:

	Cost	Retail	Cost to retail percentage
Beginning inventory	$ 40,000	$ 48,000
Add: Net Purchases	$ 210,000	$ 244,000
Add: Freight-in	-
Net markups		$ 6,000
	$ 250,000	$ 298,000	84% [$250,000/$298,000]
(Less): Markdowns		($ 18,000)
Goods available for sale		$ 280,000
Net sales		($ 230,000)
Estimated ending inventory at retail		$ 50,000
Estimated ending inventory at cost [$50,000 x 84%]	$ 42,000