Almaden Valley Variety Store uses the retail inventory method to estimate ending inventory and cost of...

Almaden Valley Variety Store uses the retail inventory method to estimate ending inventory and cost of goods sold. Data for 2021 are as follows:

	Cost		Retail
Beginning inventory	$	22,000	$	30,000
Purchases		112,600		175,000
Freight-in		2,500
Purchase returns		4,500		12,000
Net markups				11,000
Net markdowns				8,000
Normal spoilage				5,200
Net sales				162,000

Required:
Complete the table below to estimate the ending inventory and cost of goods sold for 2021, applying the conventional retail method using the information provided.

Solutions

Expert Solution

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cost . . . . . . . . .Retail

Beginning inventory . . . . . . . . . . . $ 22,000 . . . . . . $30,000

Purchases . . . . . . . . . . . . . . . . . . . . 112,600 . . . . . . 175,000

Freight-in . . . . . . . . . . . . . . . . . . . . . . .2500

Less: Purchase returns . . . . . . . . . . . . (4,500) . . . . . . . (12,000)

Add: Net markups . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,000

Totals . . . . . . . . . . . . . . . . . . . . . . . .132600.. . . . . . .204,000

132600 / 204,000 = 65% cost-to-retail ratio

Less: Net markdowns . . . . . . . . . . . . . . . . . . . . . . . . . . (8,000)

Less: Normal spoilage . . . . . . . . . . . . . . . . . . . . . . . . . .(5,200)

Less: Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(162,000)

Ending Inventory at Retail . . . . . . . . . . . . . . . . . . . . . . . 28,800

Ending Inventory at Cost 28,800 x 65% . . . . . . . . . . . . . .18720

COGS 132600 - 18720 . . . . . . . . . . . . . . . . . . . . . . . . .113880

ekkarill92 answered 1 year ago

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