Question

Roberson Corporation uses a periodic inventory system and the retail inventory method. Accounting records provided the following information for the 2016 fiscal year:

	Cost			Retail
Beginning inventory	$	315,000		$	590,000
Net purchases		716,000			1,275,000
Freight-in		14,000
Net markups					35,000
Net markdowns					8,000
Normal spoilage					5,000
Net sales					1,490,000

The company records sales to employees net of discounts. These discounts totaled $34,000 for the year.

Estimate ending inventory and cost of goods sold using the conventional method.

Cost Retail Cost-to- Retail Ratio $ $ Beginning inventory Plus: Purchases Freight-in Net markups Goods available for sale Less: Net markdowns Goods available for sale 315,000 716,000 14,000 0 590,000 1,275,000 O 35,000 1,900,000 8,000 1,892,000 1,045,000 Cost-to-retail percentage 70% 0 0 Less: Normal spoilage Net sales Employee discounts Estimated ending inventory at retail Estimated ending inventory at cost Estimated cost of goods sold 5,000 1,490,000 34,000 363,000 O $ 254,000 X 791,000 $

Answer 1

	Cost	Retail	Cost-to-Retail Ratio
Beginning Inventory	$315,000	$590,000
Add: Purchases	$716,000	$1,275,000
Freight-in	$14,000	$0
Net markups	$0	$35,000
Goods available for sale		$1,900,000
Less: Net markdowns	$0	($8,000)
	$1,045,000	$1,892,000
Cost-to-retail percentage ($1,045,000/$1,892,000*100)			55%
Less: Normal spoilage	$0	($5,000)
Net sales	$0	($1,490,000)
Employee discounts	$0	($34,000)
Estimated ending inventory at retail		$363,000
Less: Estimated ending inventory at cost ($363,000*55/100)	($199,650)
Estimated cost of goods sold	$845,350