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ezto ACCOUNTING Chapter 9 HW Question 15 (of 17) 15. value: 10.00 points LeMay Department Store uses the retail inventory method to estimate ending inventory for its monthly financial statements. The following data pertain to one of its largest departments for the month of March 2016: Cost Retail Beginning inventory54,000 Purchases Freight-in Purchase returns Net markups Net markdowns Normal breakage Net sales Employee discounts $ 74,000 221,000 414,000 18,358 6,500 9,000 7,200 4,900 9,000 294,000 1,600 Sales are recorded net of employee discounts. Required 1. Compute estimated ending inventory and cost of goods soid for March applying the conventional retail method. Cost Retail Beginning inventory Plus: Purchases Freight-in Less: Purchase returns Plus: Net markups Less: Net markdowns
Expert Answer
1.
| Cost | Retail | Cost-to-Retail ratio | |
| Beginning inventory | 54000 | 74000 | |
| plus: Purchase | 221000 | 414000 | |
| Freight in | 18358 | ||
| less: purchase return | (6500) | (9000) | |
| plus: Net markups | 7200 | ||
| 486200 | |||
| less:net markdowns | – | (4900) | |
| Goods available for sale | $286858 | 481300 | |
| Cost-to-retail percentage | 286858 / 486200 = 59% | ||
| less: normal breakage | (9000) | ||
| Sales: | |||
| Net sale | (294000) | ||
| Employee discount | (1600) | ||
| Estimated ending inventory at retail | – | $176700 | |
| Estimated ending inventory at cost | 176700 * 59% = $104253 | ||
| Estimated cost of goods sold | $182605 |
2.
| Cost | Retail | Cost-to-Retail ratio | |
| Beginning inventory | 54000 | 74000 | |
| plus: Purchase | 221000 | 414000 | |
| Freight in | 18358 | ||
| less: purchase return | (6500) | (9000) | |
| plus: Net markups | 7200 | ||
| 486200 | |||
| less:net markdowns | – | (4900) | |
| Goods available for sale | $286858 | $481300 | |
| Cost-to-retail percentage | 286858 /481300 = 59.60% | ||
| less: normal breakage | (9000) | ||
| Sales: | |||
| Net sale | (294000) | ||
| Employee discount | (1600) | ||
| Estimated ending inventory at retail | $176700 | ||
| Estimated ending inventory at cost | 176700 * 59.6% = $105313 | ||
| Estimated cost of goods sold | $181545 |
