Late in 2011, Joan Seceda and four other investors took the chain of Becker Depa
ID: 2449679 • Letter: L
Question
Late in 2011, Joan Seceda and four other investors took the chain of Becker Department Stores private, and the company has just completed its third year of operations under the ownership of the investment group. Andrea Selig, controller of Becker Department Stores, is in the process of preparing the year-end financial statements. Based on the preliminary financial statements, Seceda has expressed concern over inventory shortages, and she has asked Selig to determine whether an abnormal amount of theft and breakage has occurred. The accounting records of Becker Department Stores contain the following amounts on November 30, 2014, the end of the fiscal year.
Cost
Retail
Beginning inventory
$ 74,700
$101,500
Purchases
265,419
404,500
Net markups
56,500
Net markdowns
116,300
Sales revenue
329,600
According to the November 30, 2014, physical inventory, the actual inventory at retail is $111,890.
(b)
Assuming that prices have been stable, calculate the value, at cost, of Becker Department Stores’ ending inventory using the last-in, first-out (LIFO) retail method. (Round ratios for computational purposes to 0 decimal places, e.g. 78% and final answer to 0 decimal places, e.g. 28,987.)
Estimated ending inventory at Cost
?
Late in 2011, Joan Seceda and four other investors took the chain of Becker Department Stores private, and the company has just completed its third year of operations under the ownership of the investment group. Andrea Selig, controller of Becker Department Stores, is in the process of preparing the year-end financial statements. Based on the preliminary financial statements, Seceda has expressed concern over inventory shortages, and she has asked Selig to determine whether an abnormal amount of theft and breakage has occurred. The accounting records of Becker Department Stores contain the following amounts on November 30, 2014, the end of the fiscal year.
Cost
Retail
Beginning inventory
$ 74,700
$101,500
Purchases
265,419
404,500
Net markups
56,500
Net markdowns
116,300
Sales revenue
329,600
According to the November 30, 2014, physical inventory, the actual inventory at retail is $111,890.
Explanation / Answer
(b) Estimated ending inventory at Cost
Cost of inventory at end= cost of goods available - cost of goods sold
= $340119 - $273100
= $67019
Notes:
1. cost of goods available = opening inventory + purchase
= $74700 + $265419
= $340119
2. Gross Profit =Markup / sales * $329600
= 56500 / 329600 * 329600
= $56500
3. Cost of goods sold = sales - gross profit
= $329600 - $56500
= $273100
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