Retail method?

Question

m Cost Retail
Begining of inventory 35,000 65,000
Purchases 162,500 265,000
Purchases returns and allowance (6,000) (10,000)
Freight-in 85,000
Sales 247,500
Sales returns and allowances (75,00)



what is ending inventy of this?
I am stuck...please help me

Answer 1

Description Cost Retail
Beg. invntry 35,000 65,000
Purchases 162,500 265,000
Pur. Returns (6,000) (10,000)
Freight-in 85,000
Available for sale 276,500 320,000
Sales less returns ------ (240,000)
Ending inventory ----------- 80,000

Your goods available for sale at retail prices were $320,000, out of which you sold $240,000, again at retail prices. That leaves you with an ending inventory at retail prices of $80,000. You're looking for ending inventory at cost. Look for the relationship between cost and retail.

Look at the available for sale line. Goods which cost $276,500 can sell for $320,000, so cost is 86% of retail. (rounded to 0 decimal places). Now apply this percentage to your $80,000, i.e. 86% of $80,000 and you'll get ending inventory at cost of $68,800.