Question

13) On March 17, 2018, a flood destroyed the entire inventory of Beatty Co. The touwing LLULUM is available from its accounting records: Inventory, January 1, 2018 Purchases, Jan. 1 - Mar. 17 Sales, Jan. 1 - Mar. 17 Normal gross margin $ 208,000 420,000 600,000 40% Required: Compute the estimated cost of inventory lost in the flood. (3 pts) Show your work or you will lose 1 point. 14) Andover Stores uses the average cost retail method to estimate its ending inventory. Information as of June 30, 2018, is as follows: Beginning inventory Net purchases Net sales Cost Retail $ 45,000 $82,000 245,000 418,000 400,000 Required: Use the retail method to estimate the June 30, 2018, inventory. (3 pts) Show your work or you will lose 1 point Page 6

Answer 1

Answer- 13)-The estimated cost of inventory lost in flood= $212000.

Explanation- Estimated cost of inventory lost in flood =( Sales, Jan.1 to Mar.17+ Gross profit) - (Opening inventory, January 1,2018+ Purchases Jan.1 to Mar.17)

= {$600000+($600000*40%)}-($208000+$420000)

= ($600000+$240000) - $628000

= $212000

Answer- 14)- Ending inventory at cost using the retail method =$58000.

Explanation-

Cost to retail ratio = ($290000/$500000)*100

= 58%

Ending inventory at cost using the retail method =$100000*58%

=$58000

PARTICULARS	COST	RETAIL
	$	$
Beginning inventory	45000	82000
Add- Net Purchases	245000	418000
Goods available for sale	290000	500000
Less- Sales		400000
Ending inventory at retail		100000