Selected data on inventory, purchases, and sales for Celebrity Tan Co. and Ranch

Question

Selected data on inventory, purchases, and sales for Celebrity Tan Co. and Ranchworks Co. are as follows: Cost Retail Celebrity Tan Co. Inventory, August 1 $ 300,000 $ 575,000 Transactions during August: Purchases (net) 2,021,900 3,170,000 Sales 3,250,000 Ranchworks Co. Inventory, March 1 $880,000 Transactions during March through November: Purchases (net) 9,500,000 Sales 15,800,000 Estimated gross profit rate 38% Required: 1. Determine the estimated cost of the inventory of Celebrity Tan Co. on August 31 by the retail method.* Enter all ratios as percents, rounded to one decimal place. 2. a. Estimate the cost of the inventory of Ranchworks Co. on November 30 by the gross profit method.* b. Assume that Ranchworks Co. took a physical inventory on November 30 and discovered that $369,750 of inventory was on hand. What was the estimated loss of inventory due to theft or damage during March through November? * Refer to the list of Amount Descriptions provided for the exact wording of the answer choices for text entries.

Explanation / Answer

Answer

Cost Retail Beginning inventory 300000 575000 Purchases 2021900 3170000 Cost of Goods available for sale 2321900 3745000 Cost to Retail ratio=2321900/3745000 0.62 Cost of Goods available for sale 2321900 3745000 Less sales 3250000 Ending Inventory 495000 Cost to Retail ratio 0.62 Ending Inventory 306900 Ans 2(a) Opening balance of mercandise Inventory 880000 Add: Purchases 9500000 Add Gross Profit 38%*15800000 6004000 Total 16384000 Less: sales 15800000 Ending Inventory 584000 Estmated Loss 365750-584000 - 218250

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