Kiddie World uses a periodic inventory system and the retail inventory method to

Question

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, 2018 Cost Retail Beginning inventory $300,000 $450,000 Net purchases Freight-in Net markups Net markdowns Net sales 861,000 1,21e,000 22,000 48,000 18,000 1,200,000 Estimate ending inventory and cost of goods sold using the conventional method. (Round ratio calculation to 2 decimal places (i.e., 0.1234 should be entered as 12.34%.)) Cost-to-Retail Ratio Cost Retail Beginning inventory Plus: Net purchases Freight-in Net markups Goods available for sale Less: Net markdowns Goods available for sale Cost-to-retail percentage Less: Net sales Estimated ending inventory at retail Estimated ending inventory at cost Estimated cost of goods sold

Explanation / Answer

Cost Retail Cost-to-Retail Ratio Beginning inventory 300000 450000 Plus: Net purchases 861000 1210000         Freight-in 22000         Net markups 48000 Goods available for sale 1183000 1708000 Less: Net markdowns -18000 Goods available for sale 1183000 1690000 Cost-to-retail percentage 0.7 Less: Net sales 1200000 840000 Estimted ending inventory at retail 490000 Estimted ending inventory at cost 343000 (490000*0.7) Estimated cost of goods sold 840000 (1183000-343000)

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