Question

Wally-Mart values its inventory using the conventional retail inventory method. It discloses the following data for a recent period.

	At Cost	At Retail
Beginning inventory	$222,200	$330,000
Purchases	710,600	1,238,600
Purchase returns	13,200	22,000
Freight-in	17,600
Additional markups		26,400
Additional markup cancellations		11,000
Markdowns		19,800
Markdown cancellations		4,400
Sales		1,188,000
Sales returns (and restored to inventory)		13,200

Compute estimated ending inventory for the period-end using the conventional retail inventory method.

Answer 1

	Cost price	Retail price
Beginning Inventory	$222,200	$330,000
Purchases	$697,400 ($710,600-$13,200)	$1,216,600 ($1,238,600-$22,000)
Freight in	$17,600
Net Markups		$15,400 ($26,400-$11,000)
Totals	$937,200	$1,562,000

Cost to retail ratio = $937,200 / $1,562,000 = 0.6

Retail price total	$1,562,000
Less : Net markdowns	$15,400 ($19,800-$4,400)
Total goods at retail	$1,546,600
Less : Sales	$1,174,800 ($1,188,000-$13,200)
Ending inventory at retail	$371,800

Ending inventory at costs = $371,800 * 0.6 = $223,080