Question

Boyne Inc. had beginning inventory of $12,000 at cost and $20,000 at retail. Net purchases were $120,000 at cost and $170,000 at retail. Net markups were $10,000, net markdowns were $7,000, and sales revenue was $147,000. Compute ending inventory at cost using the conventional retail method.

Answer 1

Answer:

Ending inventory at cost $30,360

Explanation:

The computation of the ending inventory at cost using conventional retail method is shown below:

Particulars                  Cost            Retail         Cost to retail ratio

beginning inventory  $12,000      $20,000

Add: purchase            $120,000    $170,000

Add:Net markups                            $10,000

Less: net markdown                        -$7,000

Goods available for sale $132,000  $193,000    

Cost to retail percentage                                      66% ($132,000 ÷ $200,000)

Less: net sales                                $147,000

Estimated ending inventory at retail   $46,000

Ending inventory at cost $30,360

                               ($46,000 ×0.66)