Question

The records for the Clothing Department of Buffalo’s Discount Store are summarized below for the month of January. Inventory, January 1: at retail $24,800; at cost $16,800 Purchases in January: at retail $139,500; at cost $76,339 Freight-in: $9,300 Purchase returns: at retail $3,100; at cost $2,200 Transfers in from suburban branch: at retail $13,000; at cost $7,200 Net markups: $7,900 Net markdowns: $4,100 Inventory losses due to normal breakage, etc.: at retail $500 Sales revenue at retail: $96,400 Sales returns: $2,300 Compute the inventory for this department as of January 31, at retail prices. Ending inventory at retail $ Compute the ending inventory using lower-of-average-cost-or-market. (Round ratios for computational purposes to 0 decimal places, e.g 78% and final answer to 0 decimal places, e.g. 28,987.) Ending inventory at lower-of-average-cost-or-market $

Answer 1

	Cost		Retail
Beginning inventory	$16,800		$24,800
Purchases	$76,339		$139,500
Freight - in	$9,300
Purchase returns	($2,200)		($3,100)
Transfers in from suburban branch	$7,200		$13,000
Cost of Goods Sold available for sale	$107,439		$174,200
Net markups			$7,900
Retail value of goods available for sale			$182,100
Net markdowns			($4,100)
Sales revenue		($96,400)
Sales returns		$2,300
Net sales			(94,100)
Inventory losses due to breakage			(500)
Ending inventory at retail			$83,400

Cost- to - retail ratio = Cost of goods sold available for sale/Retail value of goods available for sale

= ($107,439/$182,100)*100

= 59%

(b) Ending inventory at lower-of-average-cost or market = Ending inventory at retail × Cost-to-retail ratio

= $83,400 × 59%

= $49,206