# Retail inventory method

Problem 6-6BB
Retail inventory method P4
The records of Alaina Co. provide the following information for the year ended
December 31:
At Cost At Retail
January 1 beginning inventory.. . \$ 81,670 \$114,610
Cost of goods purchased.. . 492,250 751,730
Sales.. . 786,120
Sales returns.. . 4,480
Required
1. Use the retail inventory method to estimate the company’s year-end inventory.
2. A year-end physical inventory at retail prices yields a total inventory of \$78,550. Prepare a calculation showing the company’s loss from shrinkage at cost and at retail.

At Cost At Retail
Goods available for sale

Beginning inventory \$ 81,670 \$114,610
Coot of goods purchased 492,250 751,730
Goods available for sale 573,920 866,340

Sales Return 4,480
Deduct net sales at retail 786,120
Ending inventory at retail 75,740

Cost-to-retail ratio: (573,920 / 866,340) = 66%
Estimated ending inventory at cost (75,740 x 66%)... \$ 49,988 (is the answer I got and it is not correct)

 masud Posts: 32, Reputation: 5 Junior Member #2 May 28, 2007, 07:42 AM
I solved this question but found the same answer, don't know where is the problem.

Retail Inventory Method: Definition and Much More from Answers.com
 kimmyeann Posts: 1, Reputation: 1 New Member #3 Nov 17, 2007, 02:34 PM
Quote:
 Originally Posted by kanaali27 Problem 6-6BB Retail inventory method P4 The records of Alaina Co. provide the following information for the year ended December 31: At Cost At Retail January 1 beginning inventory . . . . . . . \$ 81,670 \$114,610 Cost of goods purchased . . . . . . . . . . . 492,250 751,730 Sales . . . . . . . . . . . . . . . . . . . . . . . . . 786,120 Sales returns . . . . . . . . . . . . . . . . . . . . 4,480 Required 1. Use the retail inventory method to estimate the company’s year-end inventory. 2. A year-end physical inventory at retail prices yields a total inventory of \$78,550. Prepare a calculation showing the company’s loss from shrinkage at cost and at retail. My Answer is: At Cost At Retail Goods available for sale Beginning inventory \$ 81,670 \$114,610 Coot of goods purchased 492,250 751,730 Goods available for sale 573,920 866,340 Sales Return 4,480 Deduct net sales at retail 786,120 Ending inventory at retail 75,740 Cost-to-retail ratio: (573,920 / 866,340) = 66% Estimated ending inventory at cost (75,740 x 66%)..... \$ 49,988 (is the answer i got and it is not correct) Can any one please help me on where i went wrong with this problem. Thank you1
Here is the correct answers you need for the at retail side

114610
751730
866340
781640
84700

To get the net sales at retail (781640) you take the 786120 (sales) minus 4480 (sales returns) equalling 781640 ( deduct net sales at retail)
That makes the ending inventory at retail 84700 then multiply that by 66% and you get the correct answer of 55902
 Herm9 Posts: 4, Reputation: 1 New Member #4 Jul 19, 2008, 02:18 PM
I have this exact problem in my accounting class. I have required 1 answered correctly but I have no idea what they are asking for #2. Can anyone explain what they are asking?

[quote=kanaali27]Problem 6-6BB
Retail inventory method P4
The records of Alaina Co. Provide the following information for the year ended
December 31:
At Cost At Retail
January 1 beginning inventory . . . . . . . \$ 81,670 \$114,610
Cost of goods purchased . . . . . . . . . . . 492,250 751,730
Sales . . . . . . . . . . . . . . . . . . . . . . . . . 786,120
Sales returns . . . . . . . . . . . . . . . . . . . . 4,480
Required
1. Use the retail inventory method to estimate the company
 morgaine300 Posts: 6,564, Reputation: 1474 Uber Member #5 Jul 20, 2008, 01:32 AM
Compare the estimated ending inventory to the actual physical count. Notice it says "at retail" so you must use the retail of the estimated inventory to do this. Your physical count shows a lower number than the estimation based on book purchases and sales. So how much is the loss? Then use the same ratio to get the loss at cost.
 greeneyedguera7 Posts: 1, Reputation: 1 New Member #6 Aug 31, 2008, 12:53 PM
Goods available for sale
Beginning Inventory \$81,670 \$114,610
Cost of Goods Purchased 492,250 751,730
Goods available for sale 573,920 866,340
Deduct: Sales @ Retail 781,640
Ending Inventory @ Retail \$84,700

Cost to Retail Ratio (573,920 / 866,340) = 66%

Estimated Ending Inventory @ Cost (\$84,700 X 66%) = \$55,902

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