Retail Method; Gross Profit Method Selected data on inventory, purchases, and sa

Question

Retail Method; Gross Profit Method

Selected data on inventory, purchases, and sales for Celebrity Tan Co. and Ranchworks Co. are as follows:

Required:

1. Determine the estimated cost of the inventory of Celebrity Tan Co. on August 31 by the retail method, presenting details of the computations.

2a. Estimate the cost of the inventory of Ranchworks Co. on November 30 by the gross profit method, presenting details of the computations.

2b. Assume that Ranchworks Co. took a physical inventory on November 30 and discovered that $214,660 of inventory was on hand. What was the estimated loss of inventory due to theft or damage during March through November?
$

Cost Retail Celebrity Tan Co. Inventory, August 1 $216,000 $328,000 Transactions during August Purchases (net) 2,490,000 3,772,000 Sales 3,880,000 Ranchworks Co. Inventory, March 1 $278,000 Transactions during March through November: Purchases (net) 3,698,000 Sales 6,057,000 Estimated gross profit rate 38%

Explanation / Answer

Solution 1:

Solution 2a:

Solution 2b:

Actual inventory on hand on november 30 = $214,660

Required inventory = $220,660

Estimated loss of inventory due to theft or damage during March through November = $220,660 - $214,660 = $6,000

Celebrity Tan Company Estimated cost of inventroy 31-Aug Particulars Cost Retail Inventory, August 1 $216,000.00 $328,000.00 Purchases during august $2,490,000.00 $3,772,000.00 Total goods available for sale $2,706,000.00 $4,100,000.00 Cost to retail ratio 66.00% Sales at retail price $3,800,000.00 Ending inventory at retail $300,000.00 Ending inventory at Cost $198,000.00

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