Problem 1 A subsidiary of J & J Products is in the process of preparing interim...

Problem 1
A subsidiary of J & J Products is in the process of preparing interim financial statements. Since they take physical inventory on an annual basis they use the Conventional Retail Inventory Method to estimate inventory. Fortunately, J & J Products keeps very detailed inventory records at both cost and retail. The following information for containers, as of the end of the third quarter, 2015, is provided.

	COST	RETAIL
BEGINNING INVENTORY	90,000	167,000
PURCHASES	250,000	435,000
PURCHASE RETURNS	8,000
MARKUPS		10,000
MARKUPS CANCELLATIONS		25,000
MARKDOWNS		5,000
EMPLOYEE DISCOUNTS		9,000
SALES		400,000

Using the conventional retail inventory method calculate ending inventory at cost (for the third quarter of 2015).

Please show all calculations in detail. thanks!!!

Expert Solution

calculation of ending inventory at cost
particulars	Cost	retail
Beginning inventory	$ 90,000.00	$ 1,67,000.00
purchases	$ 2,50,000.00	$ 4,35,000.00
purchase return	$ 8,000.00
total	$ 3,32,000.00	$ 6,02,000.00
markups		$ 10,000.00
markup cancellation		$ 25,000.00
net markups (10000-25000)		$ -15,000.00
markdown		$ 5,000.00
employeess discount		$ 9,000.00
sales		$ 4,00,000.00
inventoey in retail( total-markdwon-enployees discount-sales)		$ 1,73,000.00
cost to retail ratio = 332000/602000= 0.55
closing inventory at cost = 0.55*173000= 95150

ekkarill92 answered 1 year ago

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