M 5· 6.00 points LeMay Department Store uses the retail inventory method to esti
ID: 2468313 • Letter: M
Question
M 5· 6.00 points LeMay Department Store uses the retail inventory method to estimate ending inventory for its monthly fin ancial statements. The following data pertain to one of its largest departments for the month of March 2013: Cost Retail $48,000 S 68,000 215,000 408,000 Beginning inventory Purchases Freight-in Purchase returns Net markups Net Normal breakage Net sales Employee discounts 26,194 8,000 6,000 6,600 4,300 6,000 288,000 2,600 Sales are recorded net of employee discounts Required: 1. Compute estimated ending inventory and cost of goods sold for March applying the conventional retail method (average, LCM). (Negative amounts should be indicated by a minus sign.) Cost Retail Cost-to.Retail Ratio ginning inventory 48,000 S 68.000Explanation / Answer
Cost
Retail
Cost to retail ratio
Beginning inventory
$48,000.00
$6,800.00
Add: Purchases
$215,000.00
$408,000.00
Add: Freight In
$26,194.00
Less: Purchase returns
-$8,000.00
-$6,000.00
Add: Net markups
$6,600.00
$281,194.00
$415,400.00
67.69%
Less: Net markdowns
-$4,300.00
Goods available for sale
$411,100.00
Less:
Normal breakerage
-$6,000.00
Sales (including employee discounts)
-$290,600.00
Estimated ending inventory at retail
$114,500.00
Estimated ending inventory at cost ($114,500 * 67.69%)
-$77,507.73
Estimated cost of goods sold
$203,686.27
Cost
Retail
Cost to retail ratio
Beginning inventory
$48,000.00
$6,800.00
Add: Purchases
$215,000.00
$408,000.00
Add: Freight In
$26,194.00
Less: Purchase returns
-$8,000.00
-$6,000.00
Add: Net markups
$6,600.00
$281,194.00
$415,400.00
67.69%
Less: Net markdowns
-$4,300.00
Goods available for sale
$411,100.00
Less:
Normal breakerage
-$6,000.00
Sales (including employee discounts)
-$290,600.00
Estimated ending inventory at retail
$114,500.00
Estimated ending inventory at cost ($114,500 * 67.69%)
-$77,507.73
Estimated cost of goods sold
$203,686.27
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