Question
In: Accounting
Crosby Company owns a chain of hardware stores throughout the state. The company uses a periodic inventory system and the retail inventory method to estimate ending inventory and cost of goods sold.
Crosby Company owns a chain of hardware stores throughout the
state. The company uses a periodic inventory system and the retail
inventory method to estimate ending inventory and cost of goods
sold. The following data are available for the three months ending
March 31, 2021:
| Cost | Retail | |||||
| Beginning inventory | $ | 160,000 | $ | 280,000 | ||
| Net purchases | 607,760 | 840,000 | ||||
| Net markups | 20,000 | |||||
| Net markdowns | 4,000 | |||||
| Net sales | 800,000 | |||||
Required:
Complete the table below to estimate the LIFO cost of ending
inventory and cost of goods sold for the three months ending March
31, 2021, using the information provided. Assume stable retail
prices during the period.
| CostRetailCost-to-Retail RatioBeginning inventory$160,000$280,000Plus: Net purchases607,760840,000Net markups20,000Less: Net markdowns4,000Goods available for sale (excluding beg. inventory)607,760856,000Goods available for sale (including beg. inventory)767,7601,136,000Cost-to-retail percentage71%Less: Net sales800,000Estimated ending inventory at retail$336,000Estimated ending inventory at cost_______Estimated cost of goods sold_______ |
Solutions
Expert Solution
Estimated Ending inventory at cost =$1,99,760
Estimated COGS = $5,68,000
Explanation :
The cost/retail ratio makes up one of the main components used to calculate the retail inventory method. Two methods exist for calculating the cost/retail ratio. The first method, called the conventional retail method includes markups but excludes markdowns. This method results in a lower ending inventory value. The second method, simply called the retail method, uses both markups and markdowns to calculate the ratio. This method results in a higher-ending inventory value.
Cost of inventory under retail LIFO method :
| Particulars | cost | retail | cost to retail (%) |
| Beginning inventory | $1,60,000 | $2,80,000 | 57.143% |
| (+) Purchases | $6,07,760 | $8,40,000 | |
| (+)Markup | $20,000 | ||
| (-)Markdown | ($4,000) | ||
| Goods available for sale (Excluding inventory) | $6,07,760 | $8,56,000 | 71% |
| Goods available for sale (including inventory) | $7,67,760 | $11,36,000 | |
| (-)sales | ($8,00,000) | ||
| Ending inventory at retail | $3,36,000 | ||
|
Estimated Ending inventory at cost $2,80,000 × 57.14286% + 56,000 × 71% = $1,60,000 + $39,760 =$1,99,760 |
$1,99,760 | ||
|
Estimated COGS (Opening inventory + purchases - Ending inventory) ($1,60,000 +$6,07,760 - $1,99,760) |
$5,68,000 |
||
ekkarill92 answered 1 year agoRelated Solutions
Sparrow Company uses the retail inventory method to estimate ending inventory and cost of goods sold....
Sparrow Company uses the retail inventory method to estimate
ending inventory and cost of goods sold. Data for 2018 are as
follows:
Cost
Retail
Beginning inventory
$
89,000
$
179,000
Purchases
352,000
579,000
Freight-in
8,900
Purchase returns
6,900
10,900
Net markups
15,900
Net markdowns
11,900
Normal spoilage
2,900
Abnormal spoilage
4,512
7,900
Sales
539,000
Sales returns
9,900
The company records sales net of employee discounts. Discounts for
2018 totaled $3,900.
Required:
1. Estimate Sparrow’s ending inventory and cost of
goods...
Sparrow Company uses the retail inventory method to estimate ending inventory and cost of goods sold....
Sparrow Company uses the retail inventory method to estimate
ending inventory and cost of goods sold. Data for 2016 are as
follows:
Cost Reatail
Begining inventory. $90,000. $180,000
Purchases 335,000. 580,000
Freight in 9,000
Purchase returns. 7,000 11,000
Net markups 16,000
Net markdowns 12,000
Normal spoilage 3,000
Abnormal spoliage. 4,800 8,000
Sales 540,000
Sales returns 10,000
The company records sales net of employee discounts. Discounts
for 2016 totaled $4,000.
Required:
Estimate Sparrow’s ending inventory and cost of goods sold...
Sparrow Company uses the retail inventory method to estimate ending inventory and cost of goods sold....
Sparrow Company uses the retail inventory method to estimate
ending inventory and cost of goods sold. Data for 2021 are as
follows: Cost Retail Beginning inventory $ 83,000 $ 173,000
Purchases 368,000 573,000 Freight-in 8,300 Purchase returns 6,300
10,300 Net markups 15,300 Net markdowns 11,300 Normal spoilage
2,300 Abnormal spoilage 4,405 7,300 Sales 533,000 Sales returns
9,300 The company records sales net of employee discounts. Employee
discounts for 2021 totaled $3,300.
Required: 1. Estimate Sparrow’s ending inventory and cost of...
Sparrow Company uses the retail inventory method to estimate ending inventory and cost of goods sold....
Sparrow Company uses the retail inventory method to estimate
ending inventory and cost of goods sold. Data for 2016 are as
follows: Cost Retail Beginning inventory $ 92,000 $ 182,000
Purchases 360,000 582,000 Freight-in 9,200 Purchase returns 7,200
11,200 Net markups 16,200 Net markdowns 12,200 Normal spoilage
3,200 Abnormal spoilage 4,840 8,200 Sales 542,000 Sales returns
10,200 The company records sales net of employee discounts.
Discounts for 2016 totaled $4,200. Required: 1. Estimate Sparrow’s
ending inventory and cost of goods...
Sparrow Company uses the retail inventory method to estimate ending inventory and cost of goods sold....
Sparrow Company uses the retail inventory method to estimate
ending inventory and cost of goods sold. Data for 2018 are as
follows:
Cost
Retail
Beginning inventory
$
96,000
$
186,000
Purchases
361,000
586,000
Freight-in
9,600
Purchase returns
7,600
11,600
Net markups
16,600
Net markdowns
12,600
Normal spoilage
3,600
Abnormal spoilage
5,520
8,600
Sales
546,000
Sales returns
10,600
The company records sales net of employee discounts. Discounts for
2018 totaled $4,600.
Required:
1. Estimate Sparrow’s ending inventory and cost of
goods...
Sparrow Company uses the retail inventory method to estimate ending inventory and cost of goods sold....
Sparrow Company uses the retail inventory method to estimate
ending inventory and cost of goods sold. Data for 2018 are as
follows:
Cost
Retail
Beginning inventory
$
87,000
$
177,000
Purchases
359,000
577,000
Freight-in
8,700
Purchase returns
6,700
10,700
Net markups
15,700
Net markdowns
11,700
Normal spoilage
2,700
Abnormal spoilage
4,240
7,700
Sales
537,000
Sales returns
9,700
The company records sales net of employee discounts. Discounts for
2018 totaled $3,700.
Required:
1. Estimate Sparrow’s ending inventory and cost of
goods...
Sparrow Company uses the retail inventory method to estimate ending inventory and cost of goods sold....
Sparrow Company uses the retail inventory method to estimate
ending inventory and cost of goods sold. Data for 2018 are as
follows:
Cost
Retail
Beginning inventory
$
81,000
$
171,000
Purchases
375,000
571,000
Freight-in
8,100
Purchase returns
6,100
10,100
Net markups
15,100
Net markdowns
11,100
Normal spoilage
2,100
Abnormal spoilage
4,322
7,100
Sales
531,000
Sales returns
9,100
The company records sales net of employee discounts. Discounts for
2018 totaled $3,100.
Required:
1. Estimate Sparrow’s ending inventory and cost of
goods...
Sparrow Company uses the retail inventory method to estimate ending inventory and cost of goods sold....
Sparrow Company uses the retail inventory method to estimate
ending inventory and cost of goods sold. Data for 2018 are as
follows:
Cost
Retail
Beginning inventory
$
80,000
$
170,000
Purchases
347,000
570,000
Freight-in
8,000
Purchase returns
6,000
10,000
Net markups
15,000
Net markdowns
11,000
Normal spoilage
2,000
Abnormal spoilage
3,705
7,000
Sales
530,000
Sales returns
9,000
The company records sales net of employee discounts. Discounts for
2018 totaled $3,000.
Required:
1. Estimate Sparrow’s ending inventory and cost of
goods...
Sparrow Company uses the retail inventory method to estimate ending inventory and cost of goods sold....
Sparrow Company uses the retail inventory method to estimate
ending inventory and cost of goods sold. Data for 2018 are as
follows:
Cost
Retail
Beginning
inventory
$
94,000
$
184,000
Purchases
364,000
584,000
Freight-in
9,400
Purchase
returns
7,400
11,400
Net markups
16,400
Net
markdowns
12,400
Normal
spoilage
3,400
Abnormal
spoilage
4,919
8,400
Sales
544,000
Sales
returns
10,400
The company records sales net of employee discounts. Discounts for
2018 totaled $4,400.
Required:
1. Estimate Sparrow’s ending inventory and cost of
goods...
Kiddie World uses a periodic inventory system and the retail inventory method to estimate ending inventory...
Kiddie World uses a periodic inventory system and the retail
inventory method to estimate ending inventory and cost of goods
sold. The following data are available for the quarter ending
September 30, 2018:
Cost
Retail
Beginning inventory
$
410,000
$
545,000
Net purchases
910,000
1,320,000
Freight-in
44,400
Net markups
59,000
Net markdowns
29,000
Net sales
1,255,000
Estimate ending inventory and cost of goods sold (average
cost).
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