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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 sold for the year using the retail inventory method and the average cost application. (Round your cost-to-retail percentage calculation to 2 decimal places.) 2. Estimate Sparrow’s ending inventory and cost of goods sold for the year using the retail inventory method and the conventional application. (Round your cost-to-retail percentage calculation to 2 decimal places.)

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Part1 Estimate Sparrow’s ending inventory and cost of goods sold for the year using the retail inventory method and the average cost application
Cost Retail
Beginning inventory $92,000 $1,82,000
Add: Purchases 3,60,000 5,82,000
Freight-in 9,200
Deduct: Purchase returns -7,200 -11,200
Add: Net markups 16,200
Deduct: Net markdowns -12,200
Abnormal spoilage -4,840 -8,200
Goods available for sale 4,49,160 7,48,600 60.00
Cost/Retail % = $449,160 ÷ $748,600 = 60%
Deduct: Normal spoilage (3,200)
Net sales (542,000- 10,200) (5,31,800)
Employee discounts -4200
Ending Inventory at retail $209400.000
Ending inventory at cost (60%*209400) 125640
Cost of goods sold 3,23,520
PART 2 Estimate Sparrow’s ending inventory and cost of goods sold for the year using the retail inventory method and the conventional application.
Cost Retail
Beginning inventory 92000 182000
Add: Purchases 360000 582000
Freight-in 9200
Deduct: Purchase returns -7200 -11200
Add: Net markups 16200
Abnormal spoilage -4840 -8200
Goods available for sale 449160 760800 59.04
Cost/Retail % = $449,160 ÷ $760800 = 59%
Deduct: Net Markdown -12200
Goods available for sale 449160 748600
Deduct: Normal spoilage -3200
Net sales (542,000- 10,200) -531800
Employee discounts -4200
Ending Inventory at retail 209400
Ending inventory at cost (59%*209400) -123546
Cost of goods sold 325614

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