Question

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

Sales revenue		$108,600		Purchases (at cost)		$49,700
Sales returns		1,900		Purchases (at sales price)		92,100
Markups		9,200		Purchase returns (at cost)		1,900
Markup cancellations		1,300		Purchase returns (at sales price)		2,800
Markdowns		8,300		Beginning inventory (at cost)		35,220
Markdown cancellations		2,600		Beginning inventory (at sales price)		45,000
Freight on purchases		2,300

Compute the ending inventory by the conventional retail inventory method. (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 using conventional retail inventory method

Answer 1

Teal's Boutique
		Cost		Retail
Beginning Inventory		35,220		45,000
Purcahses	49,700		92,100
Less: Purchase returns	(1,900)		(2,800)
Add: Freight on purchases	2,300		-
Purchases (Net)		50,100		89,300
Merchandise avaialble for sale:
Add:
Markups			9,200
Less: Markup cancellations			(1,300)
Net markups				7,900
		85,320		142,200
Deduct:
Markdowns			8,300
Less: Markdown calculations			(2,600)	5,700
		85,320		136,500
Deduct: Sales (net)				106,700
Ending inventory at retail				29,800
Cost to retail ratio =	Cost of Goods Available
	Original Retail Price of Goods Available, Plus Net Markups
=	85,320	=60%
	142,200
Ending inventory at cost ($29,800 X60%)				17,880
Ending inventory at lower of cost or market				17,880