Question

Campbell Corporation uses the retail method to value its inventory. The following information is available for the year 2018: Cost Retail Merchandise inventory, January 1, 2018 $ 340,000 $ 295,000 Purchases 669,000 960,000 Freight-in 23,000 Net markups 35,000 Net markdowns 5,500 Net sales 950,000 Required: Determine the December 31, 2018, inventory by applying the conventional retail method.

Answer 1

Answer:

$334,500; $267,600

Explanation:

Under cost:

Goods available for sale:

= Beginning inventory + Purchases + Freight in + Net markups - Net markdowns

= $ 340,000 + $669,000 + 23,000 + 0 - 0

= $1,032,000

Under Retail:

Total = Beginning inventory + Purchases + Net markups

        = $ 295,000 + $960,000 + $35,000

        = $1,290,000

Goods available for sale:

= Total - Net markdowns

= $1,290,000 - 5,500

= $1,284,500

Cost to retail percentage:

= $1,032,000 ÷ $1,290,000

= 0.8 or 80%

Estimated ending inventory at retail:

= Goods available for sale - Net sales

= $1,284,500 - $950,000

= $334,500

Estimated ending inventory at cost:

= Estimated ending inventory at retail × Cost to retail percentage

= $334,500 x 0.80

= $267,600