Question

Marigold Inc. uses the retail inventory method to estimate ending inventory for its monthly financial statements. The following data pertain to a single department for the month of October 2018.

Inventory, October 1, 2018
At cost		$52,000
At retail		79,300
Purchases (exclusive of freight and returns)
At cost		264,822
At retail		418,300
Freight-in		16,500
Purchase returns
At cost		5,500
At retail		8,100
Markups		9,200
Markup cancellations		2,000
Markdowns (net)		3,600
Normal spoilage and breakage		10,000
Sales revenue		395,800

(a) Using the conventional retail method, prepare a schedule computing estimated lower-of-cost-or-market inventory for October 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 at lower-of-cost-or-market

$

Answer 1

Answer
Computation of Ending inventory using Conventional retail method
Particulars	Cost		Retail
Beginning inventory	$       52,000		$         79,300
Purchases	$     264,822		$       418,300
Purchase returns	-$         5,500		-$           8,100
Freight in	$       16,500
Totals	$     327,822		$       489,500
Markups		$    9,200
Markup cancellations		-$    2,000	$           7,200
Totals	$     327,822		$       496,700
Markdowns			-$           3,600
Normal spoilage and breakage			-$         10,000
Sales revenue			-$       395,800
Total			$         87,300
Cost to retail ratio = $327822/496700 = 66%
Ending inventory at lower of cost or market = $57,618 ($87300 * 66%].