Question

Compute the inventory by the conventional retail inventory method. E9-22 (L05) (Retail Inventory Method) The records of Ellen's Boutique report the following data for the month of April Sales revenue Sales returns Markups Markup cancellations $99,000 Purchases (at cost) 2000 Puchases (at sales price) 88,000 2,000 3,000 30,000 10,000 Purchase returns (at cost) 1,500 Purchase returns (at sales price) 9,300 Beginning inventory (at cost) 2,800 Beginning inventory (at sales price) 2.400 Markdowns Freight on purchases the convel ela

Answer 1

	Cost	Retails
Sales revenue Before Employee Discount		99,000
Less: Sales return and allowance		2,000
Net sales revenue		97,000
Purchase	48,000	88,000
Add: Freight in	2,400
Less: purchase Discount (If any)	-
Less: purchase Return	2,000	3,000
Net Purchase	48,400	85,000

Conventional retails method
	Cost	retail
Beginning inventory	30,000	46,500
Net purchase	48,400	85,000
Total	78,400	131,500
Add: Net markup (10000-1500)		8,500
Total	78,400	140,000
Less: Net markdown (9300-2800)		6,500
Less: Employee discounts granted (If any)		-
Less: Loss from breakage (normal) (If any)		-
Total	78,400	133,500

Available goods at retail price	$        133,500
Less: Net sales revenue	$          97,000
Ending inventory at retail	$          36,500
Cost to retail ratio (78400/140000)	56%
Ending inventory at retail	$          36,500
Multiply: Cost to retail ratio	56%
Ending inventory at cost using convention retail method	$          20,440