Question

Bob's Clothing Shop's inventory at cost was $30,000 on January 1. Its retail value is $42,000. During the year, Bob's Clothing Shop purchased additional merchandise at a cost of $196,000 with a retail value of $368,000. The net sales at retail for the year were $310,000. Calculate Bob's inventory at cost by the retail method. Round the cost ratio to the nearest whole percent.

Answer 1

Ending Inventory = $55,000

Step-by-step explanation:

Particular Cost price Retail price

Opening Inventory $30,000 $42,000

Add: Additional Purchases $196,000 $368,000

Cost of Goods Available for Sale $226,000 $410,000

Cost to Retail Ratio: 55 %

Less: Net Sales $310,000

Ending Inventory $55,000 $100,000

Note:

Cost to Retail Ratio = $226,000 / $410,000

Cost to Retail Ratio = 55% (Approx)