Question

Presented below is information related to Marin Company. Cost $374,710 1,393,000 Beginning inventory Purchases Markups Markup cancellations Markdowns Markdown cancellations Sales revenue Retail $283,000 2,165,000 93,800 16,500 37,300 4,500 2,181,000 Compute the inventory by the conventional retail inventory method. (Round ratios for computation 28,987.) Ending Inventory using conventional retail inventory method

Answer 1

Solution :

From the given information :

Particulars	Cost	Retail
Opening inventory	$ 374,710	$ 283,000
Purchases	$ 1,393,000	$ 2,165,000
Markups		$ 93,800
Less : Markups collection		$ 16,500
Total cost of inventory	= $ 374,710 + 1,393,000 = 1,767,710	= 283,000 + 2,165,000 + 93,800 - 16,500 = 2,525,300
Less : Markdowns		$ 37,300
Markdowns cancellation		$ 4,500
Retail after markdown		= 2,525,300 - 37,000 + 4,500 = $ 2,492,500
sales		$ 2,181,000
Total cost of ending inventory	$ 1,767,710	= 2,492,500 - 2,181,000 = $ 311,500

therefore,

Total cost as per cost inventory (TCI)= $ 1,767,710

Total cost as per retail inventory (TRI)= $ 2,525,300

Total cost of ending inventory of retail = $ 311,500

Ending

Now,cost to retail ratio = TCI / TRI

=  $ 1,767,710 / $ 2,525,300

= 0.70

= 70%

Closing inventory(Ending inventory) = Total cost of ending inventory of retail * cost to retail ratio

= $ 311,500 * 70%

= $ 311,500 * 0.70

= $ 218,050

Ending inventory = $ 218,050