Question

Campbell Corporation uses the retail method to value its inventory. The following information is available for the year 2021: Cost Retail Merchandise inventory, January 1, 2021 $ 250,000 $ 286,000 Purchases 672,000 888,000 Freight-in 14,000 Net markups 26,000 Net markdowns 4,500 Net sales 860,000 Required: Determine the December 31, 2021, inventory by applying the conventional retail method using the information provided

Answer 1

261,690

Step-by-step explanation:

The computation of inventory is shown below:-

Particulars Cost Retail Cost-to-Retail Ratio

Beginning inventory $250,000 $286,000

Add Purchases $672,000 $888,000

Freight-in $14,000

Net markup $26,000

Total $936,000 $1,200,000

Less: Net markdowns $4,500

Goods available for sale $1,195,000

Cost-to-retail percentage 0.78 (in working note)

Less: Net sales $860,000

Retail Estimated ending

inventory $335,500 ($1,195,000 - $860,000)

At cost Estimated ending

inventory $261,690

Cost-to-retail percentage is

= 936,000 ÷ 1,200,000

= 0.78

Estimated ending inventory at cost is

335,500 × 0.78

= 261,690