Question

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Required Information LeMay Department Store uses the retall inventory method to estimate ending Inventory for its monthly financial statements. The following data pertaln to one of its largest departments for the month of March 2021: Cost Retail 59,000 79,000 Beginning inventory Purchases 226,000 15,578 9,000 419,000 Freight-in Purchase returns 11,500 7,70e 5,400 11,500 299,000 2,10e Net markups Net markdowns Normal breakage Net sales Employee discounts Sales are recorded net of employee discounts. Required: 1. Compute estimated ending inventory and cost of goods sold for March applylng the conventional retail method. Cost-to-Retail Ratio Cost Retail Beginning inventory Plus: Purchases Freight-in Less: Purchase returns Plus: Net markups Less: Net markdowns Goods available for sale Cost-to-retail percentage (conventional retail method) % Less: Normal breakage Less: Net sales: Sales Employee discounts Estimated ending inventory at retail Estimated ending inventory at cost Estimated cost of goods sold

Answer 1

Answer

Conventional Retail Method
	Cost	Retail	Cost to Retail Ratio	Working
Beginning Inventory	$          59,000.00	$          79,000.00
Plus: Purchases	$        226,000.00	$        419,000.00
Freight In	$          15,578.00
Less: Purchase Returns	$          (9,000.00)	$        (11,500.00)
Plus:   Net Markups		$             7,700.00
	$        291,578.00	$        494,200.00
Less: Net MarkDowns		$             5,400.00
Goods Available for sale	$        291,578.00	$        488,800.00
Cost to retail Percentage			59.00%	( 291578 / 494200 ) x 100
Less: Normal Breakage	$                          -	$          11,500.00
Less: Net Sales
Sales		$        299,00000
Employee discounts		$ 2,100.00
Estimated ending inventory at retail		$        176,200.00
Estimated ending Inventory at cost	$        103,958			176200 x 59%
Estimated Cost of Goods Sold	$ 187,620