Question

Grand Department Store, Inc., uses the retail inventory method to estimate ending inventory for its monthly financial statements. The following data pertain to a single department for the month of October 2021: Inventory, October 1, 2021: At cost $ 20,000 At retail 30,000 Purchases (exclusive of freight and returns): At cost 100,151 At retail 146,495 Freight-in 5,100 (continued)

Answer 1

Original Retail Retail Inventory Method: Cost Purchases (Net) 30000 143695 -4500 169195 Purchases:- Add: Freight In Less: Returns Net Total Original Cost Retail 100151 146495 5100 -2100 -2800 103151 143695 2500 -265 Beginning Inventory 20000 Purchases (Net) 103151 Less:Normal Spoilage Merchandise Available for Sale 123151 Add: Markups Less: Markup Cancellations Net Markups (MU) Totals 123151 Less: Net Markdowns (MD) Totals Deduct: Sales (Net) Ending Inventory at Retail Net Sales =140000-4270 = 135730 2235 171430 -800 170630 135730 34900 Weighted Average Ratio = cost of beginning inventory + cost of inventory purchased including incidental costs such as freight-in retail value of beginning inventory + retail value of goods purchased during the period +MU = 0.72 : 1 123151 171430 Ending Inventory at Weighted average LCM = 34900* = 0.72 25,071

The reason for difference between count and inventory could be due to thefts. Also, as the method is not accurate so there can be differences between physical count and computation.