Hi, Can someone tell me what my next step should be and if I Have done the parts that I have done are correct thus far.







At cost At Retail

Jan 1 begginning inventory 81,670 114,610
Cost of goods purchased 492,250 751,730
Sales 786,120
Sales Returns 4,480




I addeded begginning inventory and cogs
total 573,920 866,340Sales -786,120
Total 80,220



Now what do I do with the sales returns.

The directions says to use the retail inentory mehtod to estimate the company's year-end inventory and 2. A year-end physical inentory at reail prices yields a total inventory of 78,550. Prepare a calculation showing the company's loss from shrinkage at cost and at retail.

ivory5130

Okay, I figured out the Inventory cost 55,902 this checks with my book but I still cant figure out how to create the calculation showing the company's loss from shrinkage at cost and at retail. The text states the answer is 4,059. Please explain how they got that?

CaptainForest

My numbers are a bit off…but the jist of it is…

1)

Net Sales are what?
Sales 786,120
Less: Sales Returns 4,480
Net Sales = 786,120 – 4,480 = 781,640

-----------------------------------------------At cost --------------At Retail

Jan 1 beginning inventory ---------------81,670---------------114,610
Cost of goods purchased ----------------492,250--------------751,730

Add the above 2 lines to get:
Goods Available & the Cost Ratio----573,920---------------866,340

Less: Sales at retail-----------------------------------------------781,640

Estimated ending inventory at Retail--------------------------84,700

Estimate ending inventory at Cost = a pro-rated amount………..see below for calculation:
Cost Ratio above was 573,920 / 866,340 = 66.25%

Therefore, estimate ending inventory at cost will be 66.25% that at retail.

So, 84,700 x 66.25% = 56,114


2) If ending inventory should be 84,700 at retail, and you only have 78,550 left…then there was a loss of 6,150 or 7.26%. The loss at the cost end would be 0.0726 x 56,114 = 4,074