Answer:
Ending inventory is $424,045
Cost of goods sold is $889,955
Explanation:
Retail Inventory method is used to estimate the value of inventory using retail price of the unit of inventory.
As per given data
Cost Retail
Beginning inventory $370,000 $515,000
Net purchases $890,000 $ 1,280,000
Freight-in $54,000
Net markups $55,000
Net markdowns $25,000
Net sales $1,235,000
Cost of Purchase = 890,000 + 54,000 = $944,000
Retail Price of Purchases = Net Purchases Retail + ( Net Markup ) = $1280,000 + ( 55,000 - 25,000 ) = 1,310,000
Cost to retail Percentage = ( $944,000 / $1,310,000 ) x 100 = 72.06%
Closing Inventory = Purchases + Net Markup - Sales = $1,280,000 + ( $944,000 / $1,310,000 ) - $1,235,000 = $75,000
Retail Cost
Beginning inventory $515,000 $370,000
Net purchases <u>$75,000</u> <u> $54,045</u> ( $75,000 x 72.06% )
Ending Inventory <u>$590,000</u> <u>$424,045</u>
Closing Inventory = Opening + Purchases - Closing = $370,000 + ( 890,000 + 54,000 ) - 424,045 = $889,955
