Alquist Company uses the retail method to estimate its ending inventory. Selecte

Question

Alquist Company uses the retail method to estimate its ending inventory. Selected information about its year 2016 operations is as follows:

Merchandise is sold to employees at a 25% of selling price discount. Employee sales are recorded in a separate account at the net selling price. The balance in this account at the end of 2016 is $390,000.

Estimate ending inventory and cost of goods sold using the conventional retail method.

a. Estimated ending inventory at retail

b. Estimated ending inventory at cost

c. Estimated cost of goods sold

      

Estimate ending inventory and cost of goods sold using the LIFO retail method. (Assume stable prices.)

a. Estimated ending inventory at retail

b. Estimated ending inventory at cost

c. Estimated cost of goods sold

      

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WorksheetLearning Objective: 09-03 Estimate ending inventory and cost of goods sold using the retail inventory method, applying the various cost flow methods.

Difficulty: 1 Easy

Alquist Company uses the retail method to estimate its ending inventory. Selected information about its year 2016 operations is as follows:

Explanation / Answer

Conventional ($) Cost Retail Beginning Inventory         2,40,000           2,90,000 Purchases       20,76,000         33,60,000 Freight-in            24,000 Add:Markups           2,50,000 Cost of Goods Available for Sale               23,40,000                 39,00,000 cost retail ratio = cost / retail = 2340000/3900000 Less: mark down         -6,10,000 0.6 Less: Sales revenue       -24,00,000 Employee discounts granted (390000/75%)*25%         -1,30,000 normal loss            -29,000 Inventory at retail                   7,31,000 cost retail ratio 60% Inventory under conventional method                   4,38,600 Estimated cost of goods sold is then determined by subtracting ending inventory from cost of goods available for sale ($2340000 - 438600 = $1901400).

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