Problem #4 (7 %) Retail Inventory Method When you undertook the preparation of t

Question

Problem #4 (7 %) Retail Inventory Method When you undertook the preparation of the financial statements for Dilfer Company at Jan 31, 2011, the following data were available: At Cost Inventory, February 1, 2010 Purchases Purchases returns and allowances Sales Markups Markdowns $70,800 219,500 4,300 $ 98,500 294,000 5,500 345,000 7,000 3,500 The company also reported normal spoilage of $6,000 and freight-in of $2,000 Compute the ending inventory at cost as of January 31, 2011, using a. the cost method; and b. the conventional retail method. tS

Explanation / Answer

1b Ending Inventory under Conventional retail method Cost Retail beginning Inventory 70800 98500 Purchases 219500 294000 Purchase returns -4300 -5500 freight on Purchases 2000 Total Add: Net mark ups Mark ups 7000 7000 288000 394000 Cost to retial persentage =288000/394000 =73.09% deduct :Net markdowns mark downs 3500 -3500 Sale price of the goods Available 390500 Normal Spoilage -6000 deduct net sales -345000 Ending Inventory at retail 39500 Ending Inventory at cost = $39500*73.09% =$28,870.55 (a) ending inventory under cost method Cost of Inventory Available for sales =$70800+$219500 - $4300+$2000 =$288000 persentage of Sales over Inventory avilable for sale =$345000/$390500 =88.35% cost of sales =$288000*88.35%=$254,448 Ending inventory under cost method =$288000-$254,448 =$33552

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.