Question

Dollar Dress Shop’s inventory at cost on January 1 was $82,800. Its retail value was $87,500. During the year, Dollar purchased additional merchandise at a cost of $300,000 with a retail value of $325,000. The net sales at retail for the year were $295,000. Calculate Dollar’s inventory at cost by the retail method. (Round the cost ratio to the nearest whole percent.)

Answer 1

Answer:

109,275

Step-by-step explanation:

Explanation

 Cost   Retail  

Beginning inventory $ 82,800   $ 87,500  

Purchases   300,000     325,000  

Cost of goods available for sale $ 382,800   $ 412,500  

Less net sales for year         295,000  

Ending inventory at retail       $ 117,500  

Cost ratio ($382,800 ÷ $412,500) = 93%

Ending inventory cost

0.93 × $117,500 = $109,275

Answer 2

The inventory of Dollar Dress Shop at cost when the retail method is used is $117, 500.

How to find the inventory cost?

When using the Retail method to find the inventory at cost, the Beginning inventory, the purchases, and the net sales are used.

The formula for finding the cost of inventory using the retail method is:

= Beginning inventory + Purchases - Net sales

= $ 87, 500 + $ 325, 000 - $ 295, 000

= $117, 500

The inventory cost of Dollar Dress Shop with the retail method is $ 117, 500.

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