Question

Adams Corporation 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 month of September 2021:    

                                                             Cost                          Retail

Beginning inventory                             23000                       37000

Net purchases                                     11500                         ?

Net markups                                                                        4200

Net markdowns                                                                    1200

Net sales                                                                               ?

The company used the average cost flow method and estimated inventory at the end of September to be $19,607.50. If the company had used the LIFO cost flow method, the cost-to-retail percentage would have been 50%. Required: Compute net purchases at retail and net sales for the month of September using the information provided. (Do not round your intermediate calculations.)

Net Purchases at retail                  20,000

Net Sales

Answer 1

Net purchases at retail	$ 20,000
Net sales	$ 25,900

Particulars	Cost ($)	Retail ($)
Beginning Inventory	$ 23,000	$ 37,000
Add: Net Purchases	$ 11,500	$ 20,000
Add: Net markups		$ 4,200
Less: Net markdowns		($ 1,200)
	$ 34,500	$ 60,000
Cost-to-retail ratio             = $ 34,500 / $ 60,000             = 57.50%
Net sales ( $ 34,100 (-) $ 60,000 )		($ 25,900)
Ending Inventory ( $ 19,607.50 / 57.50%)		$ 34,100