Prepare a schedule to calculate the estimated ending inventory at the lower of average cost or…


Question Description:

25

Retail Inventory Method – The Red Department Store uses the retail inventory method. Information relating to the computation of the inventory at December 31, 2007 is as follows: Cost Retail Cost Retail Inventory at January 1, 2007 $32,000 $80,000 Markups $60,000 Sales — 600,000 Markup cancellations 10,000 Purchases 270,000 590,000 Markdowns 25,000 Freight-in 7,600 — Markdown cancellations 5,000 Estimated normal shrinkage is 2% of sales. Required Prepare a schedule to calculate the estimated ending inventory at the lower of average cost or market at December 31, 2007, using the retail inventory method. Show supporting computations in good form.

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25