. Retail Method Kiddie World uses a periodic inventory system and the retail inv
ID: 2459516 • Letter: #
Question
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Retail Method
Kiddie World uses a periodic inventory system and the retail inventory method to estimate ending inventory and cost of goods sold. The following data are available for the quarter ending September 30, 2013:
1. Estimate ending inventory and cost of goods sold (average cost).
2. Estimate ending inventory and cost of goods sold (LIFO).
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Retail Method
Kiddie World uses a periodic inventory system and the retail inventory method to estimate ending inventory and cost of goods sold. The following data are available for the quarter ending September 30, 2013:
Cost Retail Beginning Inventory 300000 464000 Net Purchases 880000 1224000 Freight-in 24000 Net Markups 50000 Net Markdowns 16000 Net Sales 11650001. Estimate ending inventory and cost of goods sold (average cost).
2. Estimate ending inventory and cost of goods sold (LIFO).
Ending Inventory using Average Cost
COGS using Average Cost
Ending Inventory using LIFO
COGS using LIFO
Explanation / Answer
Kiddie World Details Cost Retail Cost/Retail Ratio Beginning Inventory 300,000 464,000 64.66% Net Purchase 880,000 1,224,000 Freight In 24,000 Net Markup 50,000 Net Mark down (16,000) Net Addition 904,000 1,258,000 71.86% Goods Available for sale 1,204,000 1,722,000 69.92% Sales 1,165,000 Ending Inventory 557,000 1 Cost of Goods sold average cost=1165000*69.92%= $ 814,552.85 Ending Inventory Average cost=557000*69.92% $ 389,447.15 2 Ending Inventory LIFO Ending Inventory Retail 557,000 Ending Inventory LIFO =Beginning Inventory 300,000 464,000 From Net Purchase=93000*71.86% 66,830 93,000 Ending Inventory LIFO $ 366,829.89 COSG using LIFO Sales at Retail 1,165,000 COGS LIFO =1165000*71.86%= $ 837,170.11
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