Question

The records of Windsor’s Boutique report the following data for the month of April.

Sales revenue $107,900
Purchases (at cost) $51,900
Sales returns 2,000
Purchases (at sales price) 82,700
Markups 10,900
Purchase returns (at cost) 2,000
Markup cancellations 1,700
Purchase returns (at sales price) 3,100
Markdowns 8,600
Beginning inventory (at cost) 28,117
Markdown cancellations 2,800
Beginning inventory (at sales price) 47,500
Freight on purchases 2,400

Compute the ending inventory by the conventional retail inventory method.

Answer 1

The ending inventory for Windsor's Boutique, computed using the conventional retail inventory method, is $15,166.40. This figure is derived by calculating the cost-to-retail ratio and applying it to the ending inventory at retail price.

Step-by-step explanation:

To compute the ending inventory by the conventional retail inventory method, we first need to calculate the cost-to-retail ratio and then apply it to the ending inventory at retail price. Here are the necessary steps:

1. Sum up beginning inventory at cost and purchases at cost, then subtract purchase returns at cost and add freight on purchases.
   $28,117 + $51,900 - $2,000 + $2,400 = $80,417 (Goods available for sale at cost).
2. Calculate the goods available for sale at retail by summing up beginning inventory at retail, purchases at retail, and markups, then subtracting purchase returns at retail, markup cancellations, markdowns, and adding markdown cancellations.
   $47,500 + $82,700 + $10,900 - $3,100 - $1,700 - $8,600 + $2,800 = $130,500 (Goods available for sale at retail).
3. Compute the cost-to-retail ratio by dividing goods available for sale at cost by goods available for sale at retail.
   $80,417 / $130,500 = 0.616 (Cost-to-retail ratio).
4. Determine the ending inventory at retail by subtracting sales (net of sales returns) from goods available for sale at retail.
   $130,500 - ($107,900 - $2,000) = $24,600 (Ending inventory at retail).
5. Finally, apply the cost-to-retail ratio to the ending inventory at retail to find the ending inventory at cost.
   0.616 x $24,600 = $15,166.40 (Ending inventory at cost).

The ending inventory of Windsor's Boutique calculated by the conventional retail inventory method is $15,166.40.

Answer 2

Ending Inventory by Conventional Retail Inventory Method 24,600

Explanation:

The format for Conventional Retail Inventory Method of Windsor's Boutique For the month of April

Cost Retail

Beginning Inventory 28,117 47,500

Purchases 51,900 82,700

Freight on purchases 2,400

Purchases Return (2,000) (3,100)

Add:Markups 10,900

Less :Markup Cancellations ( 1,700)

Goods Available for Sale 80,417 136,300

Less : Markdown (8600)

Add: Markdown Cancellation 2800

Less: Sales (107,900)

Add: Sales Return 2,000

Ending Inventory at Retail 24,600