Question

The records for the Clothing Department of Bridgeport’s Discount Store are summarized below for the month of January.

Inventory, January 1: at retail $24,700; at cost $17,000

Purchases in January: at retail $134,900; at cost $89,932

Freight-in: $9,100

Purchase returns: at retail $3,000; at cost $2,300

Transfers in from suburban branch: at retail $12,900; at cost $6,900

Net markups: $7,900

Net markdowns: $4,000

Inventory losses due to normal breakage, etc.: at retail $500

Sales revenue at retail: $94,600

Sales returns: $2,400 Compute the ending inventory using lower-of-average-cost-or-market. Ending inventory at lower-of-average-cost-or-market $

Answer 1

	Cost		Retail
Beginning inventory	17,000		24,700
Purchases	89,932		134,900
Freight-in	9,100
Purchases returns	(2,300)		(3,000)
Transfers in from suburban branch	6,900		12,900
Totals	120,632		169,500
Net markups			7,900
			177,400
Net markdowns			(4,000)
Sales revenue	(94,600)
Sales return	2,400
Net sales			(92,200)
Inventory losses due to normal breakage			(500)
Ending inventory at retail			80,700
Cost-to-retail ratio = (120,632/177,400) = 68%
Ending inventory at lower of average cost or market = (80,700*68%) = $54,876