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ezto.mheducation.com 10.00 points Roberson Corporation uses a periodic inventory system and the retail inventory method. Accounting records provided the following information for the 2016 fscal year: Retail Cost $305,000 Beginning inventory Net purchases Freight-in Net markups Net markdowns Normal spoilage Net sales $ 570,000 706,000 ,265,000 16,400 33,000 6,000 3,000 1,470,000 The company records sales to employees net of discounts. These discounts totaled $32,000 for the year. Estimate ending inventory and cost of goods sold using the conventional method Cost Retail Beginning inventory Plus: Purchases Freight-in Net markups Goods available for sale Less: Net markdowns Goods available for sale Less: Normal spoilage Net sales Employoe discounts Estimated ending inventory at retail Estimated ending inventory at cost Estimated cost of goods sold
Expert Answer
| Cost | Retail | Cost-to- retail ratio | ||||
| Beginning Inventory | $305,000 | $570,000 | ||||
| Plus Purchases | $706,000 | $1,265,000 | ||||
| Freight in | $16,400 | $0 | ||||
| Net Markups | $0 | $33,000 | ||||
| Goods Available for Sale | $1,027,400 | $1,868,000 | ||||
| Less Net mark downs | $0 | $6,000 | ||||
| Goods Available for Sale | $1,027,400 | $1,862,000 | ||||
| Cost to retail Percentage | $1027400/$1862000 | 55.18% | ||||
| less Normal Spoilage | $3,000 | |||||
| Net Sales | $1,470,000 | |||||
| Employee Discounts | $32,000 | |||||
| Estimated Ending Inventory at retail | $357,000 | |||||
| Estimated Ending Inventory at Cost | $196,983 | (55.18% of Retail) | ||||
| Estimated Cost of Goods Sold | $830,417 | |||||
| Product | Cost | NRV | Per Unit Inventory Value | Unit | Cost | Lower of Cost and NRV |
| 1 | $76 | $126 | $76 | $2,300 | $174,800 | $174,800 |
| 2 | $47 | $45 | $45 | $2,300 | $108,100 | $103,500 |
| Cost | $282,900 | |||||
| Inventory Value | $278,300 | |||||
| Before Tax Income Effect | ||||||
| Before tax income will be lower by $4600 ($282900-$278300) | ||||||
| Cost | Retail | Cost-to- retail ratio | ||||
| Beginning Inventory | $15,000 | $23,000 | ||||
| Plus Purchases | $105,600 | $168,000 | ||||
| Freight in | $2,700 | $0 | ||||
| Less Purchase Returns | $5,500 | $8,500 | ||||
| Plus Net Markups | $0 | $7,500 | ||||
| Goods Available for Sale | $117,800 | $190,000 | ||||
| Less Net mark downs | $0 | $4,500 | ||||
| Goods Available for Sale | $117,800 | $185,500 | ||||
| Cost to retail Percentage | $117800/$185500 | 63.50% | ||||
| less Normal Spoilage | $4,500 | |||||
| Net Sales | $155,000 | |||||
| Estimated Ending Inventory at retail | $26,000 | |||||
| Estimated Ending Inventory at Cost | $16,511 | (63.5% of Retail) | ||||
| Estimated Cost of Goods Sold | $101,289 | |||||
