In: Accounting
Exercise 5-16B Estimating ending inventory-retail method LO P4
In 2017, Dakota Company had net sales (at retail) of
$134,000.
At Cost | At Retail | |||||||
Beginning inventory | $ | 32,300 | $ | 64,600 | ||||
Cost of goods purchased | 64,106 | 98,800 | ||||||
The above additional information is available from its records at
the end of 2017. Use the retail inventory method to estimate
Dakota's 2017 ending inventory at cost. (Round cost ratio
to the nearest whole percentage.)
|
Solution:
At Cost | At Retail | |
Beginning inventory | $32,300 | $64,600 |
Cost of goods purchased | $64,106 | $98,800 |
Cost of goods available for sale | $96,406 | $163,400 |
Cost ratio = $96,406 / $163,400 * 100
= 59%
Sales at retail = $134,000
Estimated Inventory at retail = $163,400 - $134,000
= $29,400
Estimated Inventory at cost = $29,400 * 59%
= $17,346.