ew History Bookmarks Tools Window Help WileyPLUS un C Q Search Weygandt, Financi

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ew History Bookmarks Tools Window Help WileyPLUS un C Q Search Weygandt, Financial& Managerial Accounting, 2e Fi Gradebook ORION Downloadable eTextbook nt FULL SCREe Multiple Choice Question 147 Clooney Department Store estimates inventory by using the retail inventory method. The following information was developed At Cost $360,000 Beginning inventory Goods purchased Net sales At Retail 750,000 900,000 1,350,000 1,400,000 The estimated cost of the ending inventory is $420,000 $280,000 $466,667 s336,000. LINK TO Question Attempts: 0 of 1 used 8 3

Explanation / Answer

$ 420,000

Working:

As per retail inventory method, cost of ending inventory is calculated as follows: Step-1:Calculation of cost of goods available for sale Beginning Inventory $          3,60,000 Goods purchased $          9,00,000 Cost of goods available for sale $       12,60,000 Step-2:Calculation of retail value of goods available for sale Beginning Inventory $          7,50,000 Goods purchased $       13,50,000 Retail value of goods available for sale $       21,00,000 Step-3:Calculation of cost to retail ratio Cost to retail ratio = Cost of goods available for sale /Retail Value of goods available for sale = $ 12,60,000 / $ 21,00,000 = 60% Step-3:Calculation of retail value of ending inventory Retail Value of goods available for sale $       21,00,000 Less Net Sales $       14,00,000 Retail Value of Ending Inventory $          7,00,000 Step-4:Calculation of cost of ending inventory Cost of Ending Inventory = Reail Value of Ending Inventory x Cost to retail ratio = $          7,00,000 x 60% = $          4,20,000

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