Asked by Cortni Mckinney on Apr 24, 2024
Verified
Shannon's Department Store prepares monthly financial statements but only takes a physical count of merchandise inventory at the end of the year. The following information has been developed for the month of July: At Cost At Retail Beginning inventory $36,000$50,000 Merchandise purchases 99,000150,000\begin{array} { l r r } & \text { At Cost } & \text { At Retail } \\\text { Beginning inventory } & \$ 36,000 & \$ 50,000 \\\text { Merchandise purchases }& 99,000 & 150,000\end{array} Beginning inventory Merchandise purchases At Cost $36,00099,000 At Retail $50,000150,000 The net sales for July amounted to $150000.
Instructions
Use the retail inventory method to estimate the ending inventory at cost for July. Show all computations to support your answer.
Retail Inventory Method
An accounting method used by retailers to estimate inventory cost by relating the cost of goods sold to retail sales.
Net Sales
The amount of revenue a company generates from its sales activities after deducting any returns, allowances, and discounts.
Beginning Inventory
The value of a business's inventory at the start of an accounting period.
- Compute ending inventory using the retail inventory method.
Verified Answer
MS
manish singh6 days ago
Final Answer :
At Cost At Retail Beginning inventory $36,000$50,000 Merchandise purchases 99,000‾150,000 Goods available for sale 135,000‾‾200,000 Net sales 150,000 (1) Ending inventory at retail $50,000(2) Cost to retail ratio =67.5%($135,000÷$200,000).(3) Ending inventory at cost =($50,000×67.5%)=$33,750\begin{array}{lrr} & \text { At Cost } & \text { At Retail } \\\text { Beginning inventory } & \$ 36,000 & \$ 50,000 \\\text { Merchandise purchases } & \underline{99,000} & 150,000 \\\text { Goods available for sale } & \underline{\underline{135,000}} & 200,000 \\\text { Net sales } & & 150,000 \\\text { (1) Ending inventory at retail } & & \$ 50,000\\\text {(2) Cost to retail ratio \(= 67.5 \% ( \$ 135,000 \div \$ 200,000 )\).}\\\text {(3) Ending inventory at cost \(= ( \$ 50,000 \times 67.5 \% ) = \$ 33,750\)}\end{array} Beginning inventory Merchandise purchases Goods available for sale Net sales (1) Ending inventory at retail (2) Cost to retail ratio =67.5%($135,000÷$200,000).(3) Ending inventory at cost =($50,000×67.5%)=$33,750 At Cost $36,00099,000135,000 At Retail $50,000150,000200,000150,000$50,000
Learning Objectives
- Compute ending inventory using the retail inventory method.