Question & Answer: Campbell Corporation uses the retail method to value its inventory. The following information is available for the year 2016:…..

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velue 10.00 points Campbell Corporation uses the retail method to value its inventory. The following information is available for the year 2016: Cost $320,000 675,000 21,000 Retail $293,000 944,000 Merchandise inventory, January 1, 2016 Freight-in Net markups Net markdowns Net sales 33,000 5,300 930,000 Required Determine the December 31, 2016, inventory that approximates average cost, lower of cost and net realizable value. Cost-to-R Cost Retail Beginning inventory Plus: Purchases Freight-in Net markups Less: Net markdowns Goods available for sale Cost-to-retail percentage Less: Net sales Estimated ending inventory at retail Estimated ending inventory at cost

Campbell Corporation uses the retail method to value its inventory. The following information is available for the year 2016: Required: Determine the December 31, 2016, inventory that approximates average cost, lower of cost and net realizable value.

Expert Answer

	Cost	Retail	Cost-to-Retail Ratio
Beginning inventory	320000	293000
Plus: Purchase	675000	944000
Freight in	21000
Net markups		33000
	1016000	1270000
(-) Net markdowns		-5300
Goods available for sale	1016000	1264700

Cost-to- retail percentage			80.34%
			(1016000/1264700)
Less: Net sales		-930000
Estimated ending inventory at retail		334700
Estimated ending inventory at cost	2,68,882.11
	(334700*80.34%)

Cost to Retail Ratio = (cost of beginning inventory+cost of inventory purchased including incidental costs such as freight-in) / (retail value of beginning inventory+retail value of goods purchased during the period)

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