Question

Lacy's Linen Mart uses the average cost retail method to estimate inventories. Data for the first six months of 2021 include: beginning inventory at cost and retail were $63,000 and $122,000, net purchases at cost and retail were $314,000 and $482,000, and sales during the first six months totaled $492,000. The estimated inventory at June 30, 2021, would be:______

Answer 1

Answer:

$69,899.2

Explanation:

The calculation of estimated inventory is shown below:-

Retail value of goods available for sale = retail price of beginning inventory + retail price of purchases

= $122,000 + 482,000

= $604,000

Difference =  Goods available for sale at retail price - Actual sales made

= $604,000 - 492,000

= $112,000

Cost to retail price ratio = (Cost of beginning inventory + Cost of purchases) ÷ (Retail price of beginning inventory + Retail price of purchases)

= ($63,000 + $314,000) ÷ ($122,000 + $482,000)

= $377,000 ÷ $604,000

= 62.41%

Ending inventory = Difference × Cost retail ratio

= $112,000 × 62.41%

= $69,899.2