Question

Coronado Inc. had beginning inventory of $12700 at cost and $20900 at retail. Net purchases were $113930 at cost and $158500 at retail. Net markups were $9600, net markdowns were $7400, and sales revenue was $151100. Compute ending inventory at cost using the conventional retail method. (Round ratios for computational purposes to 0 decimal places, e.g. 78% and final answer to 0 decimal places, e.g. 28,987.)

Answer 1

To find the ending inventory at cost, calculate the cost-to-retail ratio, then use it to adjust the ending inventory at retail. The end result is approximately $20,348.

Step-by-step explanation:

To compute the ending inventory at cost using the conventional retail method, we need to follow these steps:

1. Calculate the cost-to-retail ratio by adding net markups to beginning inventory and net purchases at retail and then subtracting net markdowns. This gives the adjusted retail value. Divide beginning inventory and net purchases at cost by this adjusted retail value to get the cost-to-retail ratio.
2. Determine the goods available for sale at retail by adding the beginning inventory at retail to net purchases at retail, and then adjusting for markups and markdowns.
3. Subtract the sales revenue from the goods available for sale at retail to get the ending inventory at retail.
4. Finally, multiply the ending inventory at retail by the cost-to-retail ratio to find the ending inventory at cost.

Using the given numbers:

1. Cost-to-retail ratio = ($12700 + $113930) / ($20900 + $158500 + $9600 - $7400) = $127,630 / $177,600 ≈ 71.9% (rounded to 0 decimal places)
2. Goods available for sale at retail = $20900 + $158500 = $179,400
3. Ending inventory at retail = $179,400 - $151100 = $28,300
4. Ending inventory at cost = 0.719 * $28,300 ≈ $20,348 (rounded to 0 decimal places)

Answer 2

Ending Inventory: 21,267.70

Step-by-step explanation:

cost retail

beginning 12,700 20,900

purchases 113,930 158,500

markups 9,600

markdowns (7,400)

total 126,630 181,600

inventory to retail ratio: 126,630 / 181,600 = 0.6973

sales revenues 151,100

COGS: 151,100 x 0.6973 = 105,362.30

Ending Inventory: 126,630 - 105,362.30 = 21,267.70