Question

Blue Inc. had beginning inventory of $11,800 at cost and $21,100 at retail. Net purchases were $131,580 at cost and $183,400 at retail. Net markups were $9,500, net markdowns were $6,900, and sales revenue was $138,600. Compute ending inventory at cost using the conventional retail method.

Answer 1

$45,895

Step-by-step explanation:

Retails with markups:

= Beginning inventory + Purchases + Markups

= $21,100 + $183,400 + $9,500

= $214,000

Merchandise available for sale at cost:

= Beginning inventory + Purchases

= $11,800 + $131,580

= $143,380

Ending inventory at retail:

= Retails with markups - Markdown - sales

= $214,000 - $6,900 - $138,600

= $68,500

With conventional method calculating the ratio using only markups :

= Merchandise available for sale at cost ÷ Retails with markups

= $143,380 ÷ $214,000

= 67%

Ending inventory at cost:

= Ending inventory at retail × ratio

= $68,500 × 67%

= $45,895