In: Accounting
Retail inventory method; various cost methods
Sparrow Company uses the retail inventory method to estimate ending inventory and cost of goods sold. Data for 2016 are as follows:
Cost | Retail | ||
Beginning Inventory | $90,000 | $180,000 | |
Purchases | $355,000 | $581,000 | |
Freight-in | $9,000 | ||
Purchase Returns | $7,000 | $11,000 | |
Net Markups | $16,000 | ||
Net Markdowns | $12,000 | ||
Normal Spoilage | $3,000 | ||
Abnormal Spoilage | $4,800 | $8,000 | |
Sales | $540,000 | ||
Sales Returns | $10,000 |
The company records sales net of employee discounts. Discounts for 2016 totaled $4,000.
Required:
Estimate Sparrow’s ending inventory and cost of goods sold for the year using the retail inventory method and the following applications:
1. Average cost
2. Conventional