Question

The records of Larkspur’s Boutique report the following data for the month of April.

Sales revenue		$91,200		Purchases (at cost)		$45,400
Sales returns		1,900		Purchases (at sales price)		92,100
Markups		10,000		Purchase returns (at cost)		1,900
Markup cancellations		1,300		Purchase returns (at sales price)		3,000
Markdowns		9,200		Beginning inventory (at cost)		36,560
Markdown cancellations		2,600		Beginning inventory (at sales price)		44,200
Freight on purchases		2,300

Compute the ending inventory by the conventional retail inventory method

Ending inventory using conventional retail inventory method

$

Answer 1

Solution:

The ending inventory by the conventional retail inventory method :

Accounts and details	Cost		Retail
Beginning inventory	$36,560		$44,200
Purchases	$45,400		$92,100
Freight on purchases	$2,300
Less: Purchase returns	($1,900)		($3,000)
Total	$82,360		$133,300
Add: Net markups
Mark ups		$10,000
Cancellation of mark ups		($1,300)	$8,700
	$82,360		$142,000
Less:  Net Mark downs
Mark downs		$9,200
Cancellation of mark downs		($2,600)	($6,600)
Sales price of goods available			$135,400
Less: Net sales ($91,200 - $1,900)			($89,300)
Ending inventory at retail			$46,100

Cost to retail ratio :

= $82,360 / $142,000 *100

= 58%

Ending inventory at cost = 58% * $46,100

= $26,738

.

Ending inventory at retail

$46,100

.

Ending inventory at cost  $26,738

$26,738

.