Question

Presented below is information related to Crane Inc.

		Cost		Retail
Inventory, 12/31/20		$246,800		$384,500
Purchases		974,100		1,445,200
Purchase returns		59,000		81,500
Purchase discounts		17,800		—
Gross sales revenue		—		1,426,700
Sales returns		—		98,600
Markups		—		118,000
Markup cancellations		—		40,200
Markdowns		—		45,400
Markdown cancellations		—		20,000
Freight-in		42,800		—
Employee discounts granted		—		7,800
Loss from breakage (normal)		—		4,600

Assuming that Crane Inc. uses the conventional retail inventory method, compute the cost of its ending inventory at December 31, 2021. (Round ratios for computational purposes to 0 decimal places, e.g 78% and final answer to 0 decimal places, e.g. 28,987.)

Ending inventory using the conventional retail inventory method

$

Answer 1

Calculation of Ending Inventory ( Conventional Retail Inventory Method)

	Cost	Retail
Inventory 12/31/20	246800	384500
Add Purchases	974100	1445200
Less Purchase return	(59000)	(81500)
Less Purcahse discount	(17800)
Add Freight in	42800
Add mark up		118000
Less mark up cancellation		(40200)
	1186900	1826000
Less Mark down		(45400)
Add mark down cancellation		20000
Less Employee discounts		(7800)
Less loss from breakage		(4600)
Sales price of goods available for sale		1788200
Less Gross sales		(1426700)
Add Sales return		98600
Ending Inventory at retail		460100

Cost to retail ratio =1186900/1826000*100=65%

Ending inventory at cost =460100*65%=$299065