Question

Irving inc

7. Radighieri 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 August 2018 Inventory, August 1. 2018 At cost $ 1.000 At retail $136.000 Purchases (exclusive of freight and returns) At cost $185.000 At retail $261.000 Freight-in 21,600 Purchase returns At cost $9.200 At retail $12,400 Markups $9,000 Markup cancellations $3,000 Markdowns (net) $16,600 Normal spoilage and breakage at retail $6,000 Sales $310,000 a. Use the average cost retail method to estimate ending inventory and Cost of Goods Sold. b. Using the conventional retail method, prepare a schedule computing estimated lower-of- cost-or-market inventory and Cost of Goods Sold for August 31, 2018. c. Finally, prepare Radigheiri's inventory using the LIFO retail method.

Answer 1

number 7. a)

	cost	retail	cost to retail %
beggining inventory	91,000.00	136000
purchases	185,000.00	261000
Freight in	21,600.00
purchase returns	(9,200.00)	(12,400.00)
markups net		6,000.00
markdowns net		(16,600.00)
goods available for sale	288,400.00	374,000.00	77.11
normal spoilage		(6,000.00)
sales		(310,000.00)
ending inventory at retail		58,000.00
ending inventory at cost	58000*77.11%= 44,723.8

the cost of goods sold is =goods available for sale at cost - ending inventory at cost

288,400-44,723.8= 243,676.2 cost of goods sold.

To get the percentage, we divided the goods available for sale at cost by the goods available for sale at retail.

b) the lower cost of market expresses that we must record the cost of inventory at whichever cost is lower – the original cost or its current market price(retail price). We exclude the markdowns, that´s why now the inventory at retail is higher.

ending inventory at cost	inventory at retail(excluding the markdowns)	lower of cost of market
44,723.80	74,600.00	44,723.80

c) for this part we can use the same chart on part a

	cost	retail	cost to retail %
beggining inventory	91,000.00	136000
purchases	185,000.00	261000
Freight in	21,600.00
purchase returns	(9,200.00)	(12,400.00)
markups net		6,000.00
markdowns net		(16,600.00)
goods available for sale	288,400.00	374,000.00	77.11
normal spoilage		(6,000.00)
sales		(310,000.00)
ending inventory at retail		58,000.00
ending inventory at cost	58000*77.11%= 44,723.8

but we add some other calculations.

	retail
begining inventory	136000	*	66.91%	90997.6
ending inventory at retail	58000	*	77.11%	44723.8
total	194000			135721.4

question 9.

1)

Date	Account	Debit	Credit
march 8	purchase	15,000.00
	accounts payable		15,000.00
march 11	account payable	2,200.00
	return in purchase		2,200.00
march 17	purchase	16,000.00
	accountss payable		16,000.00
march26	accounts payable	16000
	discount in purchase	320.00
	cash		15680
march 27	purchase	36000
	accounts payable		36000

2)

Date	Account	Debit	Credit
march 8	purchase	15,000.00
	discount in purchase	150.00
	accounts payable		14,850.00
march 11	account payable	2,200.00
	return in purchase		2,200.00
march 17	purchase	16,000.00
	discount in purchase	320.00
	accountss payable		15680
march26	accounts payable	15680
	cash		15680
march 27	purchase	36000
		720
	accounts payable		35280

c) it is better to record with the gross method because it is better to record the discount when it happens, just in case at the end we don´t get it