Asked by Dominique Handy on May 07, 2024
Verified
Talkington Rae Company reports goods available for sale at cost $76800. Beginning inventory at retail is $40000 and goods purchased during the period at retail were $80000. Sales for the period amounted to $85000.
Instructions
Determine the estimated cost of the ending inventory using the retail inventory method.
Retail Inventory Method
An inventory valuation method used in retail, estimating inventory value by relating the end inventory cost to the sales cost.
Ending Inventory
The total value of all inventory items that a business has in stock at the end of an accounting period.
- Implement inventory valuation techniques for calculating the ending inventory cost via the retail inventory method.
Verified Answer
MF
Melody FrancisMay 08, 2024
Final Answer :
At Cost At Retail Beginning inventory $40,000 Goods purchased $80,000‾ Goods available for sale $76,800120,000 Net sales 85,000‾ Ending inventory $35,000‾\begin{array} { l r r } &\text { At Cost } & \text { At Retail }\\\text { Beginning inventory } &&\$40,000 \\\text { Goods purchased } & & \underline{\$8 0,000 }\\\text { Goods available for sale } & \$ 76,800 & 120,000 \\\text { Net sales } & & \underline{ 85,000 }\\\text { Ending inventory } & & \underline{\$35,000} \\\end{array} Beginning inventory Goods purchased Goods available for sale Net sales Ending inventory At Cost $76,800 At Retail $40,000$80,000120,00085,000$35,000 First calculate the cost to retail ratio.
$76800 ÷ $120000 = 64%
Apply this ratio to the ending inventory at retail.
$35000 × .64 = $22400
$22400 is the estimated cost of the ending inventory.
$76800 ÷ $120000 = 64%
Apply this ratio to the ending inventory at retail.
$35000 × .64 = $22400
$22400 is the estimated cost of the ending inventory.
Learning Objectives
- Implement inventory valuation techniques for calculating the ending inventory cost via the retail inventory method.
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