Question

Lacy's Linen Mart uses the average cost retail method to estimate inventories. Data for the first six months of 2021 include: beginning inventory at cost and retail were $78,000 and $132,000, net purchases at cost and retail were $324,000 and $492,000, and sales during the first six months totaled $502,000. The estimated inventory at June 30, 2021, would be: Multiple Choice $78,080. $64,880. $81,380. $73,130.

Answer 1

$78,592

Step-by-step explanation:

The computation of estimated inventory is shown below:-

Cost of Goods available for sale = Beginning inventory + Net purchases

= $78,000 + $324,000

= $402,000

Retail value of goods available for sale = Retail price of beginning inventory + Retail price of purchases

= $132,000 + 492,000

= $624,000

Cost to retail percent = Cost of Goods available for sale ÷ Retail value of goods available for sale

= $402,000 ÷ $624,000

= 64.42%

Estimated ending inventory at retail = Cost of Goods available for sale at retail - Sales

= $624,000 - $502,000

= $122,000

Estimated ending inventory at cost = Estimated ending inventory at retail × Cost to retail percent

= $122,000 × 64.42%

= $78,592

Therefore the correct answer is $78,592. So, in the given question the option is not available.