Question

Drake Corporation had the following amounts, all at retail:

Beginning inventory $3,600

Purchases
$140,000

Purchase returns $6,000

Net markups $18,000

Abnormal shortage $4,000

Net markdowns
$2,800

Sales revenue $77,000

Sales returns $1,800

Employee discounts $1,600

Normal shortage $2,600

What is Drake's ending inventory at retail?

Answer 1

Drake Corporation's ending inventory at retail is calculated by adjusting beginning inventory and purchases with purchases returns, markups, and markdowns, and then subtracting sales (adjusted for returns and discounts) and shortages. The ending inventory at retail comes to $85,800.

Step-by-step explanation:

To calculate Drake Corporation's ending inventory at retail, we need to consider beginning inventory, purchases, purchase returns, net markups, abnormal shortage, net markdowns, sales revenue, sales returns, and employee discounts. Here is the calculation step-by-step:

Add Net Markups to Purchases: $140,000 + $18,000 = $158,000.

Subtract Purchase Returns from the result of step 1: $158,000 - $6,000 = $152,000.

Subtract Net Markdowns: $152,000 - $2,800 = $149,200.

Add the adjusted purchases to the Beginning Inventory: $3,600 + $149,200 = $152,800.

Subtract Sales (minus Sales Returns and Employee Discounts): $77,000 - $1,800 - $1,600 = $73,600.

Subtract Normal Shortage: $73,600 - $2,600 = $71,000.

Subtract Abnormal Shortage: $71,000 - $4,000 = $67,000.

The remaining amount is the Ending Inventory at Retail, which is $152,800 - $67,000 = $85,800.