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

Question

The records of Ellen’s Boutique report the following data for the month of April.

Compute the ending inventory by the conventional retail inventory method. (Round ratios for computational purposes to 0 decimal places, e.g. 78% and final answer to 0 decimal places, e.g. 28,987.)

Sales Revenue $95,100 Sales Returns 2,700 Markups 10,600 Markup Cancellations 1,400 Markdowns 9,400 Markdown Cancellations 3,300 Freight on Purchases 3,200 Purchases (at cost) 60,700 Purchases (at sales price) 89,000 Purchase Returns (at cost) 2,700 Purchase Returns (at sales price) 4,000 Beginning Inventory (at cost) 30,024 Beginning Inventory (at sales price) 50,600

Explanation / Answer

Ending inventory by the conventional retail inventory method = $ 20,136

The calculations are given below:

Cost Retail Beginning Inventory 30024 50600 Purchases (Net) 58000 85000 Add freight in 3200 0 Merchandise available for sale 91224 135600 Add: Net Markups 9200 91224 126400 Cost to retail ratio - 91224/126400 0.721709 Assumption - A Less: Net markdowns 6100 91224 120300 Cost to retail ratio =91224/120300 0.758304 Assumption - B Sales (Net) 92400 Ending inventory at retail 27900 Ending inventory at cost with assumption A =27900*0.721709 20136 with assumption B =27900*0.758304 21157 According to the conventional retail inventory method the lower value of $ 20,136 will be the value of the ending inventory

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