Question

Cullumber uses the conventional retail method to determine its ending inventory at cost. Assume the beginning inventory at cost (retail) were $379000 ($583000), purchases during the current year at cost (retail) were $1835000 ($3080000), freight-in on these purchases totaled $118000, sales during the current year totaled $2780000, and net markups (markdowns) were $61000 ($97000). What is the ending inventory value at cost? Hint: Round intermediate calculation to 3 decimal places, e.g. 0.635 and final answer to 0 decimal places.

Answer 1

Answer:

$544,621

Explanation:

Cost :

Merchandize available for sale

= Beginning inventory + Purchases + Freight in

= $379,000 + $1,835,000 + $118,000

= $2,332,000

Retail:

Merchandize available for sale

= Beginning inventory + Purchases + Markup

= $583,000 + $3,080,000 + $61,000

= $3,724,000

Ending inventory at retail

= Retail total - Mark down - Net sales

= $3,724,000 - $97,000 - $2,780,000

= $847,000

Cost to retail ratio

= $2,332,000 ÷ ( $2,780,000 + $847,000)

= $2,332,000 ÷ $3,627,000

= 64.30%

Since ending inventory at retail = $847,000

And

Cost to retail = 64.30%

Therefore,

Ending inventory at cost = $847,000 × 64.30%

Ending inventory at cost = $544,621