Question

Pet Emporium had a robbery on the weekend in which a large amount of inventory was taken. The loss is covered completely by insurance. A physical inventory count determined that the cost of the remaining merchandise is $58,300. The following additional information is available: 14 sa Beginning merchandise inventory Purchase returns and allowances Purchases Transportation-in Sales Sales returns and allowances At Cost At Retail $ 74,800 $ 93,550 14,800 19,800 1,239,100 1,731,250 18,550 1,640,500 17,800 Required: 1. Prepare an estimate of ending merchandise inventory using the retail method. PET EMPORIUM Estimated Inventory At Cost At Retail Goods available for sale: Goods available for sale Cost to retail ratio Estimated ending inventory at cost

Answer 1

Solution

Pet Emporium

Estimation of inventory:

Pet Emporium
Estimated Inventory
	AT Cost	At Retail
Goods available for sale:
Beginning inventory	$74,800	$93,550
Purchases	$1,239,100	$1,731,250
Transportation - in	$18,550
Purchase returns and allowances	($14,800)	($19,800)
Goods available for sale:	$1,317,650	$1,805,000
Cost to retail ratio	73.00%
Cost of goods available for sale	$1,317,650	$1,805,000
Less: net sales		$1,622,700
Ending inventory		$182,300
ending inventory x cost retail ratio		73%
Ending inventory	$133,079

Notes:

Cost to retail ratio = 1,317,650/1,805,000 = 73%

Net sales = sales – sales returns and allowances

= $1,640,500 - $17,800 = $1,622,700

2. calculation of the cost of stolen inventory –

Ending inventory at cost = $133,079

Less: cost of remaining merchandise = $58,300

Cost of stolen inventory = $74,779