Question

Presented below is information related to Splish Company. Cost Retail Beginning inventory $318,504 $279,000 Purchases 1,363,000 2,117,000 Markups 93,200 Markup cancellations 16,400 Markdowns 38,300 Markdown cancellations 5,500 Sales revenue 2,158,000 Compute the inventory by the conventional retail inventory method. (Round ratios for computational purposes to 0 decimal places, e.g. 78% and final answer to 0 decimal places, e.g. 28,987.) Ending inventory using conventional retail inventory method $

Answer 1

$191,760

Step-by-step explanation:

For determining the ending inventory using the conventional retail inventory method we need to do following computations which are given below:

As per cost method

Goods available for sale:

= Beginning inventory + Net Purchase for the year

= $318,504 + $1,363,000

= $1,681,504

Under Retail method

Goods available for sale:

= Beginning inventory + Net Purchases for the year + net markups - net markdown

= $279,000 + $2,117,000 + $76,800 - $32,800

= $2,440,000

Now

Cost to retail ratio is

= $1,792,000 ÷ $279,000 + $2,117,000 + $76,800

= 0.68

And, Estimated ending inventory as per retail

= Goods available for sale at Retail - Net sales

= $2,440,000 - $2,158,000

= $282,000

Therefore, Estimated ending inventory as per cost is

= Estimated ending inventory at retail × Cost to retail ratio

= $282,000 × 0.68

= $191,760