Question

Boyne Inc. had a beginning inventory of $12,000 at a cost and $20,000 at retail. Net purchases were $120,000 at cost and $170,000 at retail. Net markups were $10,000; net markdowns were $7,000; and sales revenue was $147,000. Compute ending inventory at cost using the conventional retail method.

Ending inventory using the conventional retail method ________ $

Answer 1

$24,000

Step-by-step explanation:

For conventional retail method, there is the inclusion of markups but excludes markdown, which bring about lower inventory value, hence allows retailer track cost of purchasing and sales price.

Boyne inc. had beginning inventory of $12,000 at a cost and $20,000 at retail, so the ratio of inventory cost and sales price is 60% [$12,000/20,000 × 100]

Then, the inventory cost of $170,000 at retail

= 60% × ($170,000 + $10,000)

= 60% + $180,000

= $108,000

The ending inventory cost of Boyne inc.

= Beginning inventory of $12,000 + Net purchases $120,000 - Inventory cost for sales $108,000

= $24,000