23. Dicer uses the cost method to determine its ending inventory at cost. Assume

Question

23. Dicer uses the cost method to determine its ending inventory at cost. Assume the beginning inventory at cost was $260,000 and at retail was $396,000, purchases during the current year at cost were $1,370,000 and $2,200,000 at retail, freight-in on these purchases totaled $86,000, sales during the current year totaled $2,000,000, and net markups were $48,000 and net markdowns were $72,000, respectively. What is the ending inventory value at cost (to the nearest $1)?

A. $371,228

B. $338,092

C. $381,638

D. $286,804

Explanation / Answer

Answer: A. $371,228

Detailed explanation -

Now this inventory value has to be adjusted at cost value. For this purpose the following calculation is done.

Ending inventory ratio = Total cost / Total Retail cost = 1,716,000 / 2,644,000 = 0.649

Thus, Ending inventory at cost = $572,000 * 0.649 = $371,228

Valuing the inventory at retail cost Opening Stock $        396,000 Add: Purchases $    2,200,000 Add: Net Markups $          48,000 Less: Sales $    2,000,000 Less: Net Markdowns $          72,000 Ending Inventory value at retail cost $        572,000

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