Question

P9.9 (LO 5) (Retail Inventory Method) Presented below is information related to Waveland Inc. Cost Retail Inventory, 12/31/20 $250,000 $ 390,000 Purchases 914,500 1,460,000 Purchase returns 60,000 80,000 Purchase discounts 18,000 Gross sales revenue (after employee discounts) 1,410,000 Sales returns 97,500 Markups 120,000 Markup cancellations 40,000 Markdowns 45,000 Markdown cancellations 20,000 Freight-in 42,000 Employee discounts granted 8,000 Loss from breakage (normal) 4.500 IIIIII

Answer 1

Answer-THE COST OF ENDING INVENTORY

WAVELAND INC.

Particulars	Cost ($)	Amount ($)	Retail ($)
beginning inventory	250,000		390,000
Add:Purchases	914,500		1,460,000
Add: Freight-in	42,000		0
Less:Purchase Returns	60,000		80,000
Less:Purchase Discounts	18,000		0
Total	1,128,500		1,770,000
Add: Net Markups
Markups		120,000
Markups cancellation		-40,000	80,000
Total	1,128,500		1,850,000
Less: Net Markdowns
Markdowns		45,000
Markdowns cancellation		-20,000	25,000
Sales		1,410,000
Less: Sales Returns		-97,500	1,312,500
Employee discounts			8,000
Loss from breakage			4,500
Ending inventory at retail			500,000

Cost to retail ratio as shown below:-

Cost to retail ratio= Cost/ Retail

=1,128,500/ 1,850,000

=61%

Cost of ending inventory as shown below:-

Cost of ending inventory= $500,000*61%

=$305,000