Question

Presented below is information related to Kingbird Inc. Cost Retail Inventory, 12/31/20 $254,700 $397,600 Purchases 1,002,796 1,454,100 Purchase returns 59,600 80,100 Purchase discounts 17,900 — Gross sales revenue — 1,423,100 Sales returns — 95,600 Markups — 119,500 Markup cancellations — 40,500 Markdowns — 44,300 Markdown cancellations — 20,200 Freight-in 41,400 — Employee discounts granted — 8,000 Loss from breakage (normal) — 4,200
Instructions. Assuming that Waveland Inc. uses the conventional retail inventory method, compute the cost of its ending inventory at December 31, 2020.

Answer 1

Answer:

Closing inventory is $294,932

Explanation:

The retail inventory method is used by retailers in estimating their closing inventory.

It identifies the relationship between cost and retail prices and thus associates cost to its net sales using the cost to retail ratio to work our its costs of sales which further guides in defining what his profit ought to be.

The cost to retail ratio is cost price divided by retail selling price

The cost of sales worked out is then deducted from Cost of Goods available for sales to determine the closing inventory/stock.

The schedule attached shows the relationship between cost and retail and how we arrived at a closing inventory of $294,932