Cost Retail Inventory 12/31/17 $251,100 $390,400 Purchases 906,368 1,447,600 Purchase Returns 60,000 79,400 Purchase Discounts 18,100...

	Cost	Retail
Inventory 12/31/17	$251,100	$390,400
Purchases	906,368	1,447,600
Purchase Returns	60,000	79,400
Purchase Discounts	18,100	-
Gross Sale Revenue	-	1,426.100
Sales Returns	-	97,300
Markups	-	119,700
Markup Cancellarions	-	39,500
Markdowns	-	45,800
Markdown cancellation	-	20,000

Freight in	42,300	-
Employee Discounts granted	-	8,200
Loss from breakage	-	4,100

Assuming that Crane Inc. uses the conventional retail inventory method, compute the cost of its ending inventory at December 31, 2018. (Round ratios for computational purposes to 0 decimal places, e.g 78% and final answer to 0 decimal places, e.g. 28,987.)

Ending inventory using the conventional retail inventory method

Solutions

Expert Solution

1. Calculate the retail value of the goods available for sale

Retail value of goods available for sale = Retail value of opening inventory + Retail value of goods purchased.

= $390400 + (1,447600 - 79400) =	$ 1,758,600.00

2. Total sales during the period = $(1,426,100-97300)	$ 1,328,800.00

3. Calculate total cost = Opening Inventory + cost of purchases

= $251100 + (906368 - 60,000) + 42,300 =	$ 1,139,768.00

4. Cost to retail Percentage = $1139768/1758600	65%	Approx..

5. Difference between Retail value of goods available for sale & Total sales during the period

= 1758600-1328800	$ 429,800.00

6. Ending Inventory under retail inventory method = $429800 x Cost retail percent(64%)

= 429800*65%	$ 279,370.00

NOTE: In the given question, purchase discount is not considered for total cost since it is a cash discount received on payment to suupliers and therefore does not impact total cost. Moreover, markups and markdowns is the percent earned over the cost and therefore will not be considered for calculating the revenue as gross sales already includes and excludes both of them.

ekkarill92 answered 2 years ago

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