Part 3 Traditional Retail Inventory Method The records for t

Part 3: Traditional Retail Inventory Method The records for the Clothing Department of Sharapova\'s Discount Store are summarized below for the month of January At Retail At Cost Inventory, January Purchases in January Freight-in Purchase returns Transfers in from suburban branch Inventory losses due to normal breakage, etc Sales revenue Sales returns Net markups Net markdowns $ 25,000 17,000 137,000 82,500 7,000 2,300 9,200 3,000 13,000 400 95,000 2,400 $ 8,000 4,000 (a) Compute the inventory for this department as of January 31, at retail prices (b) Compute the ending inventory at cost, using retail conventional method

Solution

Solution:

Part-1) Solution: $83,000

Working:

Cost

Retail

Beginning Inventory

17,000

25,000

Purchases

82,500

137,000

Freight-in

7,000

Purchase returns

-2,300

-3,000

Transfers in from suburban branch

9,200

13,000

113,400

172,000

Net markups

8,000

180,000

Net markdowns

-4,000

Sales revenue

-95,000

Sales returns

2,400

Net sales

-92,600

Inventory losses due to breakage

-400

Ending inventory at retail

83,000

Part-2) Solution: $52,290

Working:

Cost-to-retail ratio = 113,400 / 180,000 = 63%

Ending inventory at lower-of-average-cost-or-market = $83,000 * 63% = $52,290

	Cost	Retail
Beginning Inventory	17,000	25,000
Purchases	82,500	137,000
Freight-in	7,000
Purchase returns	-2,300	-3,000
Transfers in from suburban branch	9,200	13,000
	113,400	172,000
Net markups		8,000
		180,000
Net markdowns		-4,000
Sales revenue	-95,000
Sales returns	2,400
Net sales		-92,600
Inventory losses due to breakage		-400
Ending inventory at retail		83,000