Kiddie World uses a periodic inventory system and the retail

Kiddie World uses a periodic inventory system and the retail inventory method to estimate ending inventory and cost of goods sold. The following data are available for the quarter ending September 30, 2018:

Estimate ending inventory and cost of goods sold (LIFO). (Round ratio calculation to 2 decimal places (i.e., 0.1234 should be entered as 12.34%.))

	Cost		Retail
Beginning inventory	$	300,000		$	450,000
Net purchases		861,000			1,210,000
Freight-in		22,000
Net markups					48,000
Net markdowns					18,000
Net sales					1,200,000

Answer is complete but not entirely correct. ost-to- Retail Ratio Cost Retail Beginning inventory Plus: Net purchases $ 300,000 450,000 861,000210,000 22,000 Freight-in Net markups 48,000 (18,000) 1,240,000 1,690,000 Less: Net markdowns Goods available for sale (excluding beg Invento 883,000 Goods available for sale (including beg Invento 1,183,000 Cost-to-retail percentage 70.00% (1.200,000) $ 490,000 Less: Net sales Estimated ending inventory at retail Estimated ending inventory at cost Estimated cost of goods sold (343,000) $ 840,000

Solution

Cost-to-retail percentage = 1183000/(1690000+18000)*100

= 1183000/1708000*100

= 69.26

Estimated ending inventory at cost (69.26% × $490,000) = $399,374

	Cost	Retail	Cost-to-retail ratio
Beginning inventory	300000	450000
Plus: Net purchases	861000	1210000
Freight-in	22000
Net markups		48000
Less- Net Markdowns		(18000)
Goods available for sale (Excluding beg. Inventory)	883000	1240000
Goods available for sale (Including beg. Inventory)	1183000	1690000
Cost-to-retail percentage			69.26
Less: Net sales		(1200000)
Estimated ending inventory at retail		490000
Estimated ending inventory at cost	399374
Estimated cost of goods sold	783626