Question

Estimating Inventory Using Retail Inventory Method—Conventional

Outlet Store applies the conventional retail inventory method. Information relating to the computation of inventory for 2020 follows. Estimated normal spoilage is 2% of sales.

At Cost At Retail

Beginning inventory $72,000 $144,000

Sales 1,080,000

Purchases 540,000 1,062,000

Freight-in 14,400

Markups 108,000

Markup Cancellations 36,000

Markdowns 45,000

Markdown Cancellations   9,000

Calculate estimated ending inventory for 2020 using the conventional retail method.

• Do not round the cost ratio in your calculations.

• Round your final answer below to the nearest dollar.

Ending Inventory $________

Answer 1

• Requirement asked

Ending Inventory = $ 79,403

• Working

Conventional Retail Method
	Cost	Retail	Cost to Retail Ratio	Working
Beginning Inventory	$          72,000.00	$        144,000.00
Plus: Purchases	$        540,000.00	$    1,062,000.00
Freight In	$          14,400.00
Net Markups		$          72,000.00
	$        626,400.00	$    1,278,000.00
Less: Net MarkDowns		$          36,000.00
Goods Available for sale	$        626,400.00	$    1,242,000.00
Cost to retail Percentage			49.0140845070423%	( 626400 / 1278000 ) x 100
Less: Net Sales		$    1,080,000.00
Estimated ending inventory at retail		$        162,000.00		1242000 - 1080000
Estimated ending Inventory at cost using conventional retail inventory method	$          79,402.82 [Answer]			162000 x 49.0140845070423%