A retailer has a beginning monthly inventory valued at $80,000 at retail and $52
ID: 2550307 • Letter: A
Question
A retailer has a beginning monthly inventory valued at $80,000 at retail and $52,500 at cost. Net purchases during the month are $190,000 at retail and $115,000 at cost. Transportation charges are $10,500. Sales are $225,000. Markdowns and discounts equal $30,000. A physical inventory at the end of the month shows merchandise valued at $15,000 (at retail) on hand. Compute the following: a. Total merchandise available for sale—at cost and at retail. b. Cost complement. c. Ending retail book value of inventory. d. Stock shortages. e. Adjusted ending retail book value. f. Gross profit. A retailer has a beginning monthly inventory valued at $80,000 at retail and $52,500 at cost. Net purchases during the month are $190,000 at retail and $115,000 at cost. Transportation charges are $10,500. Sales are $225,000. Markdowns and discounts equal $30,000. A physical inventory at the end of the month shows merchandise valued at $15,000 (at retail) on hand. Compute the following: a. Total merchandise available for sale—at cost and at retail. b. Cost complement. c. Ending retail book value of inventory. d. Stock shortages. e. Adjusted ending retail book value. f. Gross profit. A retailer has a beginning monthly inventory valued at $80,000 at retail and $52,500 at cost. Net purchases during the month are $190,000 at retail and $115,000 at cost. Transportation charges are $10,500. Sales are $225,000. Markdowns and discounts equal $30,000. A physical inventory at the end of the month shows merchandise valued at $15,000 (at retail) on hand. Compute the following: a. Total merchandise available for sale—at cost and at retail. b. Cost complement. c. Ending retail book value of inventory. d. Stock shortages. e. Adjusted ending retail book value. f. Gross profit.Explanation / Answer
a) Total merchandise available for sale at cost = Beg. monthly inventory+Net Purchases+Transportation charges
= $52,500+$115,000+$10,500 = $178,000
Total merchandise available for sale at Retail = Beginning monthly inventory+Net Purchases
= $80,000+$190,000 = $270,000
b) Cost complement is the relationship of cost to retail value of merchandise available for sale.
Cost Complement = Total Cost Valuation/Total Retail Valuation
= $178,000/$270,000 = 0.66 or 66%
c) Ending retail book value of inventory = Merchandise available for sale at retail - Sales - Markdowns and discounts
= $270,000 - $225,000 - $30,000 = $15,000
d) Stock shortages = Ending retail book value of inventory - Physical inventory at retail
= $15,000 (calculated in part c) - $15,000 = $0
Thus there is no stock shortages (i.e zero)
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