In: Accounting
Crane Inc. uses the retail inventory method to estimate ending
inventory for its monthly financial statements. The following data
pertain to a single department for the month of October
2021.
Inventory, October 1, 2021 | ||
At cost | $50,900 | |
At retail | 78,600 | |
Purchases (exclusive of freight and returns) | ||
At cost | 270,540 | |
At retail | 426,400 | |
Freight-in | 16,900 | |
Purchase returns | ||
At cost | 5,700 | |
At retail | 7,900 | |
Markups | 8,900 | |
Markup cancellations | 2,000 | |
Markdowns (net) | 3,500 | |
Normal spoilage and breakage | 10,000 | |
Sales revenue | 384,700 |
(a) Using the conventional retail method, prepare
a schedule computing estimated lower-of-cost-or-market inventory
for October 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 at lower-of-cost-or-market |
$ |
Cost |
retail |
|
Beginning inventory |
50,900 |
78,600 |
Add: purchases |
270,540 |
426,400 |
Add: Freight in |
16,900 |
|
Less: purchase return |
-5700 |
-7,900 |
Add: net mark-ups (8,900-2,000) |
6,900 |
|
Goods available for sale |
332,640 |
504,000 |
Cost to retail percentage |
66% |
|
Less: net markdown |
-3,500 |
|
Less: normal spoilage and breakage |
-10,000 |
|
Less: net sales |
-384,700 |
|
Estimated ending inventory retail |
105,800 |
|
Estimated ending inventory-cost |
69,828 |
.
Estimated ending inventory cost = 105,800*66% = 69,828
Cost to retail percentage = 332,640 / 504,000 * 100 = 66%