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Campbell Corporation uses the retail method to value its inventory. The following information is available for the year 2021: Cost Retail Merchandise inventory, January 1, 2021 $ 220,000 $ 283,000 Purchases 588,000 864,000 Freight-in 11,000 Net markups 23,000 Net markdowns 4,300 Net sales 830,000 Required: Determine the December 31, 2021, inventory by applying the conventional retail method using the information provided.

Respuesta :

Answer:

$335,700; $234,990

Explanation:

Under cost:

Goods available for sale:

= Beginning inventory + Purchases + Freight in + Net mark ups - Net markdowns

= 220,000 + 588,000 + 11,000 + 0 - 0

= $819,000

Under Retail:

Goods available for sale:

= Beginning inventory + Purchases + Freight in + Net markups - Net markdowns

= 283,000 + 864,000 + 0 + 23,000 - 4,300

= $1,165,700

Cost to retail ratio = $819,000 ÷ (283,000 + 864,000 + 0 + 23,000)

                              = $819,000 ÷ $1,170,700

                              = 0.7

Estimated ending inventory at retail:

= Goods available for sale(Retail) - Net sales

= $1,165,700 - $830,000

= $335,700

Estimated ending inventory at cost:

= Estimated ending inventory at retail × Cost to retail ratio

= $335,700 × 0.7

= $234,990

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