Phillips Supply uses a periodic inventory system but needs to determine the approximate amount of inventory at the end of each month without taking a physical inventory. Phillips has provided the following inventory data:
| Cost Price | Retail Selling Price |
Inventory of merchandise, June 30 | $300,000 | $500,000 |
Purchases during July | 222,000 | 400,000 |
Goods available for sale during July | $522,000 | $900,000 |
Net sales during July |
| $600,000 |
a. Estimate the cost of goods sold and the cost of the July 31 ending inventory using the retail method of evaluation.
b. Was the cost of Phillips’s inventory, as a percentage of retail selling prices, higher or lower in July than it was in June? Explain.
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