The following information is available for the past month for a retail store:
Sales
$80,000
Markups
$9,000
Markdowns
$7,000
Purchases (at cost)
$38,800
Purchases (at retail)
$107,000
Beginning inventory (at cost)
$30,000
Beginning inventory (at retail)
$46,000
What is the ending inventory at cost using the conventional retail method? (Round cost-to-retail ratios to four decimal places.)
A) $31,853
B) $33,292
C) $27,000
D) $75,000
Answer: A
Explanation: A)
Cost
Retail
Beginning inventory
$30,000
$46,000
Purchases
$38,800
$107,000
Markups
______
$9,000
Subtotal for ratio
$68,800
$162,000
Ratio $68,800 / $162,000 = 42.47%
Markdowns
($7,000)
Sales(net)
($80,000)
Ending inventory 42.47% × $75,000 =
$31,853
$75,000
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