Question

Presented below is information related to Skysong Company. Cost Retail Beginning inventory $ 56,640 $99,900 Purchases (net) 111,250 216,800 Net markups 10,119 Net markdowns 24,768 Sales revenue 173,490

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

1.

	Cost	Retail
Beginning inventory	$56,640	$99,900
Purchases	$111,250	$216,800
Goods available for sale	$167,890	$316,700
Add: Net markups		$10,119
Less: Net markdowns		($24,768)
Less: Net sales		($173,490)
Ending inventory at retail		$128,561

2.

	Cost	Retail	Cost to retail ratio
Excluding both markups and markdowns	$167,890	$316,700	53.01%
Excluding markups but including markdowns	$167,890	$291,932	57.51%
Excluding markdowns but including markups	$167,890	$326,819	51.37%
Including both markups and markdowns	$167,890	$302,051	55.58%

3.

A - Excluding markdowns but including markups

B- Excluding markdowns but including markups

C- Excluding markdowns but including markups

4.

Lower of cost of market

	Cost	Retail
Beginning inventory	$56,640	$99,900
Purchases	$111,250	$216,800
Total	$167,890	$316,700
Add: Net markups		$10,119
Total		$326,819
Less: Net markdowns		($24,768)
Goods available for sale		$302,051
Less: Sales		($173,490)
Ending inventory at retail		$128,561
Ending inventory at cost	$66,042

Cost to retail ratio =$167,890/$326,819 =51.37%

Ending inventory at cost =$128,561 ×51.37% =$66,042

Cost of goods sold =$167,890-$66,042

=$101,848

Gross profit =$173,490-$101,848

=$71,642

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