please show detail solution Boxer Inc. uses the conventional retail method to de

Question

please show detail solution

Boxer Inc. uses the conventional retail method to determine its ending inventory at cost Assume the beginning inventory at cost (retail) were $393,500 ($594,000), purchases uring the current year at cost (retail) were $3,408,000 ($5,193,600), freight-in on these purchases totaled $159,500, sales during the current year totaled $4,666,000, and net arkups were $414,000. What is the ending inventory value at cost? a. $1,535,600 C. $981,248 d. $1,050,350. eterstic of a plant asset?

Explanation / Answer

Answer

Computation of ending inventory value at cost-

Step 1- Calculation of Cost to Retail Ratio

(A+B)/(C+D)

A- Beginning inventory at cost

B- Purchases during the current year at cost including freight etc.

C- Beginning inventory at retail price

D- Purchases during the current year at retail price including markups

Cost to Retails ratio = ($393,500+$3,408,000+$159,500)/($594,000+$5,193,600+$414,000)

= $3,961,000/$6,201,600

= 0.639

Step 2 - Calculation of goods available for sale at retail price

Beginning inventory+Goods purchased including markups

= $594,000+$5,193,600+$414,000

= $6,201,600

Step 3 - Value of closing inventory at retail price-

Goods available for sale- Goods sold

= $6,201,600-$4,666,000

= $1,535,600

Step 4 - Value of Closing Inventory at cost

Value of closing inventory at retail price*Cost to retail ratio

= $1,535,600*0.639

= $981,248

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