Selected data on merchandise inventory, purchases, and sales for Celebrity Tan a

Question

Selected data on merchandise inventory, purchases, and sales for Celebrity Tan and Ranchworks Co. are as follows:

Required:

1. Determine the estimated cost of the merchandise inventory of Celebrity Tan on August 28 by the retail method, presenting details of the computations.

2a. Estimate the cost of the merchandise inventory of Ranchworks Co. on November 30 by the gross profit method, presenting details of the computations.

2b. Assume that Ranchworks Co. took a physical inventory on November 30 and discovered that $174,500 of merchandise was on hand. What was the estimated loss of inventory due to theft or damage during March thru November?
$

Cost Retail Celebrity Tan Merchandise inventory, August 1 $223,000 $328,000 Transactions during August: Purchases (net) 2,565,000 3,772,000 Sales 3,880,000 Ranchworks Co. Merchandise inventory, March 1 $234,000 Transactions during March through November: Purchases (net) 3,104,000 Sales 4,705,000 Estimated gross profit rate 33%

Explanation / Answer

1. Estimated cost of Inventory by Retail Method Celebrity TAN Cost of Merchandise Inventory Aug-31 Cost Retail Beginning In ventory $223,000.00 $328,000.00 Purchase $2,565,000.00 $3,772,000.00 Cost of Good Available for Sale $2,788,000.00 $4,100,000.00 Cost to Retail Ratio ( $278000/$4100000) $0.68 Cost of Good Avaialbale for Sale $2,788,000.68 $4,100,000.00 Less: Sales -$3,880,000.00 Ending Inventory $7,980,000.00 Cost to Retail Ratio $0.68 Ending Inventory $5,426,400.00 2. Estimated cost of Inventory by Gross Profit Method Ranchwork Co. Cost of Merchandise Inventory Nov-30 Cost Beginning In ventory $234,000.00 Purchase $3,104,000.00 Gross Profit ($4705000*33%) $1,552,650.00 Total $4,890,650.00 Less: Sales -$4,705,000.00 Ending Inventory $185,650.00 2.b Estimated Loss on Inventory Ending Inventory as per Gross profit Method $185,650.00 Physical Inventory avaiable on Nov 30 $174,500.00 Estimated Loss $11,150.00

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