E9 -10 Retail Inventory Method The Harmes Company is a clothingstore that uses t
ID: 2433914 • Letter: E
Question
E9 -10 Retail Inventory Method The Harmes Company is a clothingstore that uses the retail inventory method. The followinginformation relates to its operations during 2010:
Cost Retail
Inventory, January1 $28,400 $40,200
Purchases 65,200 100,000
Markups(net) _ 1,900
Markdowns(net) _ 400
Sales _ 80,000
Compute the ending inventory by the retail inventory method forthe following cost flow assumptions:
1. FIFO
2. Average cost
3. LIFO
4. Lower of the cost or market(based on the average cost)
Explanation / Answer
Compute the ending inventory by the retail inventory method forthe following cost flow assumptions:
Cost
Retail
$65,200
$100,000
$1,900
($400)
$101,500
$28,400
$40,200
Goods available for sale
$93,600
$141,700
$80,000
$61,700
$39,611
Cost
Retail
$28,400
$40,200
$65,200
$100,000
$1,900
($400)
Goods available for sale
$93,600
$141,700
($80,000)
$61,700
$40,784
Cost
Retail
$28,400
$40,200
$65,200
$100,000
$1,900
($400)
$101,500
Goods available for sale
$93,600
$141,700
($80,000)
$61,700
$28,400
$13,803
$42,203
Cost
Retail
$28,400
$40,200
$65,200
$100,000
$1,900
$93,600
$142,100
($400)
($80,000)
$61,700
$40,660
Cost
Retail
Purchases$65,200
$100,000
Markups(net)$1,900
Markdowns(net)($400)
$101,500
Cost to retail ratio = $65,200 / $101,500 0.642 : 1 Add : Begining Inventory$28,400
$40,200
Goods available for sale
$93,600
$141,700
Less : Sales$80,000
Ending Inventory at Retail$61,700
Ending Inventory at cost $61,700 x0.642$39,611
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