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One of Wells Companys retail outlets was destroyed by fire on March 18. All merchandise was burned. The company has fire ins

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Answer #1
Estimated Inventory Cost Retail
Beginning inventory, January 1 $45000 $58800
Purchases, January 1- March 18 125000 165250
Freight in 4650 -
Total merchandise available for sale $174650 $224050
Less: Sales 180000
Ending inventory at retail $44050
Ending inventory, March 18, at cost $34336.98

From the information we can say that the company may use retail inventory method for the purpose of calculating the ending inventory on March 18 at cost

Cost ratio= $174650*100/224050= 77.95%

Ending inventory, March 18, at cost= Ending inventory at retail*Cost ratio

= $44050*77.95%= $34336.98

Cost of goods sold= Total merchandise available for sale-Ending inventory, March 18, at cost

= $174650-34336.98= $140313.02

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