Problem

Phillips Supply uses a periodic inventory system but needs to determine the approximate am...

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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