Question

6. Crane Sales Company uses the retail inventory method to value its merchandise inventory. The following information is available for the current year:

                                                                                            Cost                    Retail

Beginning inventory                              $ 60,000               $ 90,000

Purchases                                                 380,000                 520,000

Freight-in                                                     5,000                       —  

Net markups                                                   —                      17,000

Net markdowns                                              —                      20,000

Sales revenue                                                 —                    410,000

What is the cost of ending inventory using the conventional method?

Answer 1

Answer to Question:

Calcuation of Cost of Ending Inventoryusing Conventional Method:

Particulars	Cost($)	Retail($)
Beginning Inventory	60,000.00	90,000.00
Purchases	380,000.00	520,000.00
Freight in	5,000.00
Net Markups		17,000.00
Cost of Goods available for sale	445,000.00	627,000.00
Cost to Retail Ratio	0.7097
[$4,45,000/$6,27,000]
Particulars	Cost($)	Retail($)
Cost of Goods available for sale	445,000.00	627,000.00
Less: Sales		(410,000.00)
Less: Net Markdowns		(20,000.00)
Ending Inventory		197,000.00
x Cost to Retail Ratio		0.7097
Cost of Ending Inventory under Conventional Method		139,816.59