[star1101]

Sparrow Company uses the retail inventory method to estimate ending inventory and cost of goods sold. Data for 2013 are as follows:

Cost Retail
Beginning inventory $90,000 $180,000
Purchases 355,000 580,000
Freight-in 9,000
Purchase returns 7,000 11,000
Net markups 16,000
Net markdowns 12,000
Normal spoilage 3,000
Abnormal spoilage 4,800 8,000
Sales 540,000
Sales returns 10,000

The company records sales net of employee discounts. Discounts for 2013 totaled $4,000.

Required:
1.
Estimate Sparrow’s ending inventory and cost of goods sold for the year using the retail inventory method and the average cost application

Inventory at retail?
Inventory at cost?
Estimated cost of goods sold?


2.
Estimate Sparrow’s ending inventory and cost of goods sold for the year using the retail inventory method and the conventional (average, LCM) application.

Inventory at retail?
Inventory at cost?
Estimated cost of goods sold?

[rehmanvohra]

Please see your other post - Retail Method.
The only new point in this post is normal and abnormal spoilage.
Here is the treatment:
Normal spoilage should be deducted from the retail column after cost to retail percentage is calculated. Abnormal spoilage should be deducted in both columns before calculating cost to retail percentage.