*Exercise 9-20 Presented below is information related to Flint Company Cost $53,

Question

*Exercise 9-20 Presented below is information related to Flint Company Cost $53,710 128,270 Retail Beginning inventory Purchases (net) Net markups Net markdowns Sales revenue $107,600 189,900 10,147 24,575 197,550 Compute the ending inventory at retail Ending inventory Compute a cost-to-retail percentage under the following conditions. (Round ratios to 2 decimal places, eg, 78.74%) Cost-to-retail percentage (1) Excluding both markups and markdowns. (2) Excluding markups but including markdowns. (3) Excluding markdowns but including markups. (4) Including both markdowns and markups Which of the methods in (b) above does the following? (1) Provides the most conservative estimate of ending inventory (2) Provides an approximation of lower-of-cost-or-market. (3) Is used in the conventional retail method Compute ending inventory at lower-of-cost-or-market. (Round ratio to 2 decimal places, eg. 78.74% and final answer to 0 decimal places, eg. 6,225.) Ending inventory s Compute cost of goods sold based on (d). (Round answer to 0 decimal places, e.g. 6,225.) Cost of goods sold s Compute gross margin based on (d). (Round answer to 0 decimal places, e.g. 6,225.) Gross margin $?

Explanation / Answer

Ending inventory at retail = 85522

Cost to retail percentage

Excluding both mark ups and Mark downs = (53710+128270)/(107600+189900)=61.17%

Excluding mark ups but including mark downs = (53710+128270)/(107600+189900-24575)=66.68%

Excluding mark downs but including mark ups = (53710+128270)/(107600+189900+10147)=59.15%

Including both mark ups and downs =(53710+128270)/(107600+189900+10147-24575)=64.29%

Provides the most conservative estimate of ending inventory = excluding mark downs but including mark ups

Provides an approximate of lower of cost or market= excluding mark downs but including mark ups

Is used in conventional retail method = excluding mark downs but including mark ups

Ending inventory at lower of cost or market = 59.15%*85522=50586

Cost of goods sold = 53710+128270-50586=131394

Gross margin =197550-131394 = 66156

Beginning inventory 107600 Add : Purchase 189900 Net markups 10147 Less : mark downs (24575) Sales price of goods available 283072 Less: sales (197550) Ending inventory at retail 85522

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