Question

A retailer has a closing retail inventory of $89,333 at retail. The beginning inventory had a retail value of $95,567 and a cost valuation of $40,432. Purchases for the year totaled $457,890 with a cost of $222,546. What is the estimated closing value of the inventory at cost?

		$42,451
		$555,457
		$89,333
		$67,908
		None of the above

Answer 1

Cost of goods available for sale			=	Beginning inventory at cost + Purchase at cost
			=	$ 40432 + $ 222546
			=	$ 2,62,978.00
	Beginning inventory at retail			$    95,567.00
Add:	Purchase at retail			$ 4,57,890.00
				$ 5,53,457.00
Less:	Ending inventory at retail			$    89,333.00
	Sales			$ 4,64,124.00

Cost to retail ratio		=	$ 262978 / $ 553457
		=	47.52%
Cost of sales		=	$ 464124 x 47.52%
		=	$ 2,20,531
Ending Inventory		=	Cost of Goods Available for sale - Cost of Sales
		=	$ 262978 - $ 220531
		=	$    42,447

Its quite close to $ 42451, so try selecting that option only. If you get that wrong, go for None of the above