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    Jan 15, 2011, 09:46 PM
    Retail Inventory Method
    (Retail Inventory Method)

    Presented below is information related to McKenna Company.

    Cost Retail
    Beginning inventory $58,000 $100,000
    Purchases (net) 122,000 200,000
    Net markups 20,000
    Net markdowns 30,000
    Sales 186,000


    (a) Compute the ending inventory at retail.

    $


    (b) Compute a cost-to-retail percentage (Round to two decimals, e.g. 12.25.) under the following conditions.


    Excluding both markups and markdowns.
    %


    Excluding markups but including markdowns.
    %


    Excluding markdowns but including markups.
    %


    Including both markdowns and markups.
    %

    (c) Which of the methods in (b) above (1, 2, 3, or 4) does the following?


    Provides the most conservative estimate of ending inventory.
    Method 3Method 2Method 4Method 1


    Provides an approximation of lower-of-cost-or-market.
    Method 3Method 4Method 1Method 2


    Is used in the conventional retail method.
    Method 1Method 2Method 4Method 3

    (d) Compute ending inventory at lower-of-cost-or-market. (Round to 0 decimal places, e.g. 25,250.)

    $


    (e) Compute cost of goods sold based on (d).

    $


    (f) Compute gross margin based on (d).

    $


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