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

Question

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.

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

Please show all calculations in detail. thanks!!!

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

Explanation / Answer

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

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