uses the conventional retail method to determine its ending inventory at cost. Assume the beginning inventory at cost (retail) were $200,000 ($300,000), purchases during the current year at cost (retail) were $2,000,000 ($2,800,000). Sales during the current year totaled $2,500,000, and net markups were $200,000. What is the ending inventory value at cost?

Question

Business

Athena Compton

25 September, 10:05

uses the conventional retail method to determine its ending inventory at cost. Assume the beginning inventory at cost (retail) were $200,000 ($300,000), purchases during the current year at cost (retail) were $2,000,000 ($2,800,000). Sales during the current year totaled $2,500,000, and net markups were $200,000. What is the ending inventory value at cost?

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Answers (1)

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Brendon Conway · Answer 1

The ending inventory value at cost is ($100,000)

Explanation:

To calculate the cost of ending inventory using the retail inventory method, we need to know:

The cost-to-retail percentage = COGS / sales during current year = (sales - net markup) / sales = ($2,500,000-$200,000) / $2,500,000 = 92% The cost of goods available for sale = Cost of beginning inventory + Cost of purchases = $200,000 + $2,000,000 = $2,200,000 The cost of sales during the period = Sales * cost-to-retail percentage = $2,500,000 x 92% = $2,300,000 The ending inventory = Cost of goods available for sale - Cost of sales during the period = $2,200,000 - $2,300,000 = ($100,000)