Question

uses the conventional retail method to determine its ending inventory at cost. Assume the beginning inventory at cost (retail) were $200,000 ($300,000), purchases during the current year at cost (retail) were $2,000,000 ($2,800,000). Sales during the current year totaled $2,500,000, and net markups were $200,000. What is the ending inventory value at cost?

Answer 1

Answer:

The ending inventory value at cost is ($100,000)

Explanation:

To calculate the cost of ending inventory using the retail inventory method, we need to know:

• The cost-to-retail percentage = COGS/ sales during current year  = (sales – net markup)/sales = ($2,500,000-$200,000)/$2,500,000 = 92%
• The cost of goods available for sale= Cost of beginning inventory + Cost of purchases = $200,000 + $2,000,000 = $2,200,000
• The cost of sales during the period = Sales × cost-to-retail percentage = $2,500,000 x 92% = $2,300,000
• The ending inventory = Cost of goods available for sale - Cost of sales during the period = $2,200,000 - $2,300,000 = ($100,000)