Presented below is information related to Novak Company. Cost Retail Beginning inventory $150,815 $283,000 Purchases 1,369,000...

Presented below is information related to Novak Company.

Cost

Retail
Beginning inventory $150,815 $283,000

Purchases 1,369,000 2,130,000
Markups 93,200
Markup cancellations 14,700
Markdowns 35,900
Markdown cancellations 4,900
Sales revenue 2,186,000

Compute the inventory by the conventional retail inventory method. (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 conventional retail inventory method

Expert Solution


Calculation of Ending inventory using conventional retail inventory method
	Cost	Retail
Beginning Inventory	$150,815.00	$283,000.00
Purchases	$1,369,000.00	$2,130,000.00
Inventory available for sale (cost)	$1,519,815.00	$2,413,000.00
Add : Net Markups [$93200-$14700]		$78,500.00
Retail with Markup		$2,491,500.00
Less : Net Markdowns [$35900 - $4900]		$31,000.00
Inventory available for sale (retail)		$2,460,500.00
Less : Sales Revenue		$2,186,000.00
Ending Inventory at retail		$274,500.00


To get the ending inventory at cost, first calculate the cost-to-retail ratio
Cost to retail ratio = Inventory available for sale (cost) / Inventory available for sale (retail) with markup
Cost to retail ratio = $1519815 / $2491500 = 61%

*Ending inventory using conventional retail inventory method = Ending Inventory at retail cost to retail ratio = $274500 * 61% = $1,67,445**

ekkarill92 answered 1 year ago

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