Question

Sheffield Inc. had beginning inventory of $23,200 at cost and $30,900 at retail. Net purchases were $155,500 at cost and $220,000 at retail. Net markups were $10,000, net markdowns were $6,100, and sales were $190,000. Calculate the ending inventory at cost using the retail method. (Round intermediate calculation to 2 decimal places, e.g. 15.21% and the final answer to 0 decimal places, e.g. 5,275.) Ending inventory $

Answer 1

To calculate the ending inventory at cost for Sheffield Inc. using the retail method, we determined the cost-to-retail ratio and applied it to the ending inventory at retail. The resulting ending inventory at cost for Sheffield Inc. was found to be $45,461.

Step-by-step explanation:

To calculate the ending inventory using the retail method for Sheffield Inc., we need to follow a few steps:

• Calculate the cost-to-retail ratio. This is done by adding the cost of beginning inventory to the net purchases at cost, and then dividing by the sum of the beginning inventory at retail plus the net purchases at retail, the net markups, and subtracting the net markdowns.
• Compute the total sales at retail.
• Deduct the sales from the adjusted beginning inventory at retail to find the ending inventory at retail.
• Finally, multiply the ending inventory at retail by the cost-to-retail ratio to find the ending inventory $ at cost.

Let's do the math:

1. Cost to Retail Ratio: (($23,200 + $155,500) / ($30,900 + $220,000 + $10,000 - $6,100)) = $178,700 / $254,800 = 0.70156 (rounded to five decimal places)
2. Adjusted Beginning Inventory at Retail: $30,900 + $220,000 + $10,000 - $6,100 = $254,800
3. Ending Inventory at Retail: $254,800 - $190,000 = $64,800
4. Ending Inventory $ at Cost: $64,800 * 0.70156 = $45,461 (rounded to the nearest dollar)

Therefore, the ending inventory at cost for Sheffield Inc. is $45,461.