Question

Presented below is information related to Martinez Company.

		Cost		Retail
Beginning inventory		$ 53,760		$107,700
Purchases (net)		119,400		204,800
Net markups				9,605
Net markdowns				26,513
Sales revenue				175,600

Compute the ending inventory at retail.

Ending inventory

$

Compute a cost-to-retail percentage under the following conditions. (Round ratios to 2 decimal places, e.g. 78.74%)

				Cost-to-retail percentage
(1)		Excluding both markups and markdowns.			%
(2)		Excluding markups but including markdowns.			%
(3)		Excluding markdowns but including markups.			%
(4)		Including both markdowns and markups.			%

Which of the methods in (b) above does the following?

(1)		Provides the most conservative estimate of ending inventory.		Excluding Both Markups and Markdowns.Excluding Markdowns but Including MarkupsExcluding Markups but Including MarkdownsIncluding Both Markdowns and Markups
(2)		Provides an approximation of lower-of-cost-or-market.		Excluding Both Markups and Markdowns.Excluding Markdowns but Including MarkupsExcluding Markups but Including MarkdownsIncluding Both Markdowns and Markups
(3)		Is used in the conventional retail method.		Excluding Both Markups and Markdowns.Excluding Markdowns but Including MarkupsExcluding Markups but Including MarkdownsIncluding Both Markdowns and Markups

Compute ending inventory at lower-of-cost-or-market. (Round ratio to 2 decimal places, e.g. 78.74% and final answer to 0 decimal places, e.g. 6,225.)

Ending inventory

$

Compute cost of goods sold based on (d). (Round answer to 0 decimal places, e.g. 6,225.)

Cost of goods sold

$

Compute gross margin based on (d). (Round answer to 0 decimal places, e.g. 6,225.)

Gross margin

$

Answer 1

Answer :

(a).

#	Cost	Retail
Beginnig inventory	$53,760	$107,700
Add : Purchases	$119,400	$204,800
Toal without markups & markdowns	$173,160	$312,500
Add : Net markups	-	$9,605
Total without markdowns	$173,160	$322,105
Less : Markdowns	-	$26,513
Goods available for sale	$173,160	$295,592
Less : Sales Revenue		-$175,600
Ending inventory at retail	-	$199,992

(b).

(1).	Cost to retail % excluding both markups and markdowns	55.41%	[$173,160/312,500 (Ref requirment (a))]
(2).	Cost to retail %excluding markups but including markdowns	60.55%	[$173,160/($132,500 - $26,513)]
(3).	Cost to retail % excluding markdowns but including markdups	53.76%	[$173,160 / ($312,500 + $9,605)]
(4).	Cost ot retail % including both markdowns and markups	58.58%	[$173,160 / $295,592 Ref in requirment (a))]

(c).

(1)	Provides the most conservative estimate of ending inventory	Excluding markdowns but including markups
(2)	Provides an approximate of lower of cost cost or market	Excluding markdowns but including markups
(3).	Is used in the conventional retail method	Excluding markdowns but including markups

(d).

Ending inventory at retail	$119,992	Ref : Requirment (a)
(3)Cost to retail % Exchange markdowns but including markups	53.76%	Ref : Requirment (b) serial #3
Ending inventory at lower of cost or market	$64,508	($119,992*53.76%)

(d-1)

Cost of i nventory avaialable for sale	$173,160	Ref : Requirment (a)]
Less : Ending inventory at lower of cost or market	-$64,508	{Ref : Requirment (d)]
Cost of the goods sold	$108,652	-

(d-2)

Sale Revenue	$175,000	Given
Less : Cost of goods sold	-$108,652	Ref : Requirement (d-1)
Goss Profit	$66,948	-

Kindly Up-vote Thank You !!!!