Question

Bob's Clothing Shop's inventory at cost was $30,000 on January 1. Its retail value is $42,000. During the year, Bob's Clothing Shop purchased additional merchandise at a cost of $196,000 with a retail value of $368,000. The net sales at retail for the year were $310,000. Calculate Bob's inventory at cost by the retail method. Round the cost ratio to the nearest whole percent.

Answer 1

Answer:

Ending Inventory = $55,000

Explanation:

Particular                                     Cost price        Retail price

Opening Inventory                       $30,000       $42,000

Add: Additional Purchases               $196,000       $368,000

Cost of Goods Available for Sale     $226,000       $410,000

Cost to Retail Ratio: 55 %  

Less: Net Sales                                                $310,000

Ending Inventory                                $55,000       $100,000

Note:

Cost to Retail Ratio = $226,000 / $410,000

Cost to Retail Ratio = 55% (Approx)