Question

Part 1.
Smith-Kline Company maintains inventory records at selling prices as well as at cost. For 2021, the records indicate the following data:

	($ in 000s)
	Cost			Retail
Beginning inventory	$	81		$	126
Purchases		672			1,007
Freight-in on purchases		31
Purchase returns		2			3
Net markups					5
Net markdowns					9
Net sales					917

Required:
1. Use the retail method to approximate cost of ending inventory valued under Average cost method. (Enter your answer in thousands including 2 decimal places, i.e. 12,550 would be 12.55.)

Part2.

[The following information applies to the questions displayed below.]

Smith-Kline Company maintains inventory records at selling prices as well as at cost. For 2021, the records indicate the following data:

	($ in 000s)
	Cost			Retail
Beginning inventory	$	81		$	126
Purchases		672			1,007
Freight-in on purchases		31
Purchase returns		2			3
Net markups					5
Net markdowns					9
Net sales					917

2. Use the retail method to approximate cost of ending inventory valued under Conventional method. (Enter your answer in thousands including 2 decimal places, i.e. 12,550 would be 12.55)

Answer 1

1) Cost of ending inventory under average cost method
	Cost	Retail
Beginning inventory	81	126
purchases	672	1007
freight in	31
pruchased return	-2	-3
net markups		5
net markdown		-9
goods availbal for sale	782	1126
less: net sales		-917
edning inventory at retail		209
ending inventory under average cost method	145.15
cost to retail ratio = 782/1126 = 69.45%

2)

Conventional method	Cost	Retail
Beginning inventory	81	126
purchases	672	1007
freight in	31
pruchased return	-2	-3
net markups		5
goods available for sale	782	1135
cost to retail ratio (782/1135)	68.90%
net markdown		-9
net sale		-917
ending inventory at retail		209
ending inventory at cost (209*68.90%)	144.00
ending inventory under conventional = 144