Question

Windsor Inc. had beginning inventory of $11,700 at cost and $19,700 at retail. Net purchases were $130,016 at cost and $169,800 at retail. Net markups were $10,100, net markdowns were $6,800, and sales revenue was $157,900. Compute ending inventory at cost using the conventional retail method. (Round ratios for computational purposes to 0 decimal places, e.g. 78% and final answer to 0 decimal places, e.g. 28,987.)

Answer 1

$24,779

Step-by-step explanation:

In order to calculating the ending inventory using the conventional retail inventory method. we required to do the following computations which are shown below:

Using cost method

Goods available for sale:

= Beginning inventory + Purchases

= $11,700 + $130,016

= $141,716

Using retail method

Ending inventory

= Beginning inventory + Purchases + Net markups - Net markdowns - sales revenue

= $19,700 + $169,800 + $101,00 - $6,800 - $157,900

= $34,900

Now

Cost to retail ratio = $141,716 ÷ ($19,700 + $169,800 + $101,00)

= $141,716 ÷ $199,600

= 0.71

So,

Estimated ending inventory at cost:

= Estimated ending inventory at retail × Cost to retail ratio

= $34,900 × 0.71

= $24,779