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  • May 6, 2007, 10:07 AM
    ivory5130
    Retail Inventory Method
    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.

    :confused:
  • May 6, 2007, 03:39 PM
    ivory5130
    Okay, I figured out the Inventory cost 55,902 this checks with my book but I still can't 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?
  • May 7, 2007, 12:30 AM
    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

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