Question

Marilee's Electronics uses a periodic inventory system and the average cost retail method to estimate ending inventory and cost of goods sold. The following data is available from the company records for the month of June 2021:
Cost Retail Beginning inventory $ 120,000 $ 146,000 Net purchases 383,000 580,000 Net markups 33,000 Net markdowns 51,000 Net sales 600,000
To the nearest thousand, estimated ending inventory is:_______.

Answer 1

Answer:

$76,680

Explanation:

With regards to the above

Using the cost method

Goods available for sale:

= Beginning inventory + Purchases

= $120,000 + $383,000

= $503,000

Using retail method

Goods available for sale

= Beginning inventory + Purchases + Net markups - Net markdowns

= $146,000 + $580,000 + $33,000 - $51,000

= $708,000

Now, cost to retail ratio

= $503,000 ÷ $708,000

= 0.71

Estimated ending inventory at retail

= Goods available for sale under retail method - Net sales revenue

= $708,000 - $600,000

= $108,000

Therefore, estimated ending inventory = Estimated ending inventory at retail × Cost to retail ratio

= $108,000 × 0.71

= $76,680