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The following data concerning the retail inventory method are taken from the financial records of Blake Company.


The following data concerning the retail inventory method are taken from the financial records of Blake Company.                                          Cost                     Retail

            Beginning inventory                                           $132,000              $ 220,000

            Purchases                                                            362,500                 550,000

            Freight-in                                                                16,000                       —

            Net markups                                                              —                      45,000

            Net markdowns                                                          —                      16,000

            Sales                                                                          —                    625,000


1. What is the ending inventory at retail?

                       

2. If the ending inventory is to be valued at approximately theconventional retail inventory method, the calculation of the cost to retail ratio should be based on goods available for sale at:(a) cost(dollar amount) and (b) retail(dollar amount)

3. What is the cost of ending inventory using the FIFO cost method?

4. What is the cost of ending inventory using the LIFO Retail Method?   

           

Solutions

Expert Solution

1 Calculation of Ending Inventory at Retail=

Cost to retail ratio=494500/770000=49.00%

Beginning inventory 132000 (At cost)
Purchases + 362500 (At cost)
Goods available for sale = 494500
Sales - 306250 (Sales of 625000 x 49%)
Ending inventory $188250

2. Ending Inventory Cost at Retail=188250

Cost to retail ratio=494500/770000=49.00%

3. Cost of Ending Inventory Using FIFO Cost Method=

Opening Inventory Used=132000

Reemining will be used from Purchases=(306250-132000)=174250

Clsoing Inventory=494500-174250-132000=188250

4. Cost of Ending Inventory Using LIFO Retail Method=

Total retail Inventory Used=770000*49%=377300

Remaining Inventory from Purchases=(550000-377300)=172700

Clsoing Inventory=172700+220000=392700

ekkarill92 answered 2 years ago
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