The records of Ellen\'s Boutique report the following data for the month of Apri

ID: 2422567 • Letter: T

Question

The records of Ellen's Boutique report the following data for the month of April:

Sales revenue................................................................$99,000

Sales returns.....................................................................2,000

Markups..........................................................................10,000

Markup cancellations.........................................................1,500

Markdowns.......................................................................9,300

Markdown cancellations......................................................2,800

Freight on purchases..........................................................2,400

Purchases (at cost)...........................................................48,000

Purchases (at sales price)..................................................88,000

Purchase returns (at cost)...................................................2,000

Purchase returns (at sales price).........................................3,000

Beginning inventory (at cost)..............................................30,000

Beginning inventory (at sales price)......................................46,500

Compute the ending inventory by the conventional retail inventory method.

Effective purchase (at cost) = Purchase(at cost) - Purchase returns(at cost) + freight on purchases = $48000-$2000+$2400 = $48400

Beginning inventory at cost = $30000

Total = $48400+$30000 = $78400

Effective Purchase(at retail) = Purchase(at retail) - Purchase return(at retail)+ Markup - Markups cancellations = $88000-$3000+$10000-$1500 = $93500

Beginning inventory at retail = $46500

Total = $93500+$46500 = $140000

Cost/retail ratio = $78400/$140000 = 0.56 I.e. 56%

Now we calculate ending inventory at retail prIce

Effective sales = sales - sales returns + markdowns - markdowns cancellation = $99000-$2000+$9300-$800 = $105500

Ending inventory at retail = $140000-$105500 = $34500

Ending inventory at cost = $34500*56% = $19320

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