Problem 9-10 Ayayai Inc. uses the retail inventory method to estimate ending inv

Question

Problem 9-10 Ayayai Inc. uses the retail inventory method to estimate ending inventory for its monthly financial statements. The following data pertain to a single department for the month of October 2018. Inventory, October 1, 2018 $51,000 79,100 At cost At retail Purchases (exclusive of freight and returns) At cost At retail Freight-in 273,116 429,400 16,600 Purchase returns At cost At retail Markups Markup cancellations Markdowns (net) Normal spoilage and breakage Sales revenue 5,700 8,100 9,200 2,000 3,700 10,200 390,300 (a Using the conventional retail method, prepare a schedule computing estimated lower o cost or market inventory for October 31, 2018 (Round ratios or computational purposes to 0 decimal places, e g 78% and final answer to 0 decimal places, e.g. 28,987.) Ending inventory at lower-of-cost-or-market s

Explanation / Answer

Conventional Method ($) Cost Retail Beginning Inventory       51,000         79,100 Purchases    2,73,116      4,29,400 Purchase Retuns        -5,700         -8,100 Freight       16,600 Add:Net Markups (less of cancellation)           7,200 Cost of Goods Available for Sale           3,35,016             5,07,600 cost retail ratio = cost / retail = 335016/507600 Less: mark down (less of cancellation)         -3,700 = 66% Less: Sales revenue    -3,90,300 Add:Normal spoilage       -10,200 Inventory at retail             1,03,400 cost retail ratio 66% Inventory under conventional method 103400*66% 68244

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