Question

The records of Earthly Goods provided the following information for the year ended December 21 2020
						At Cost		At Retail
January 1 beginning inventory						$                942,700		$              1,854,300
Purchases						$           6,657,660		$           12,797,400
Purchase returns						$                105,600		$                   238,700
Sales								$           10,991,400
Sales Returns								$                      89,200
Required:
Prepare an estimate of the company's year end inventory using the retail method.

Answer 1

Computation of the ending inventory at cost for the year ended
December 21, 2020 by the retail inventory method.
	Cost ($)	Retail ($)
January 1 beginning inventory	942,700.00		1,854,300.00
Purchases	6,657,660.00		12,797,400.00
Purchase returns	(105,600.00)		(238,700.00)
Goods available for sale	7,494,760.00		14,413,000.00
Sales			10,991,400.00
Less: sales returns			(89,200.00)
Net Sales			10,902,200.00
Ending inventory, December 21, 2020 at retail			3,510,800.00
(14,413,000 - 10,902,200)
Cost-to-retail ratio = 7,494,760 / 14,413,000 = 52%
Ending inventory, December 21, 2020 at cost = 3,510,800 x 52% = $1,825,616