Retail Inventory Method The records of Sudbury Menswear report the following data for the month of...

Retail Inventory Method

The records of Sudbury Menswear report the following data for the month of September:

Sales	$118,500	Purchase (at cost)	$59,500
Sales returns	2,500	Purchase (at retail)	112,600
Additional markups	10,500	Purchase return (at cost)	2,500
Markup cancellations	1,500	Purchase return (at retail)	3,500
Markdowns	9,300	Beginning inventory (at cost)	32,000
Markdown cancellations	2,800	Beginning inventory (at retail)	48,500
Freight on purchase	3,600

Required:

a. Estimate the ending inventory using the retail inventory method. Round the cost ratio to two decimal places.

b. Assuming that a physical count of the inventory determined that the actual ending inventory at retail prices at the end of September was $42,000, estimate the loss due to shrinkage and theft.

Expert Solution

a.

ending inventory using the retail inventory method
	Particulars	cost(Amt. in $)	retail(Amt. in $)	workings
	beginning inventory	32000	48500
Add	purchases	59500	112600
Add	Purchase return	-2500	-3500
Add	freight on purchase	3600
Add	markups		10500
Add	markup cancellation		-1500

Less:	Markdown(net)		-6500	(9300-2800)
Less:	Sales (net)		-116000	(118500-2500)

	ending invenory at retail	92600	44100

Therefore ending inventory is $44,100

b.

Actual ending inventory at retails price at the end of september	$42,000
Estimated ending inventory ( from above)	$44,100
Loss due to shrinkage & theft	$2,100	(44100-42000)

therefore loss due to shrinkage & theft is $2,100

ekkarill92 answered 2 years ago

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