Question

Barker Pet supply uses the conventional retail method to determine its ending inventory at cost. Assume the beginning inventory at cost (retail) were $531,200 ($653,800), purchases during the current year at cost (retail) were $2,137,200 ($2,772,200), freight-in on these purchases totaled $127,800, sales during the current year totaled $2,704,000, and net markups (markdowns) were $4,000 ($192,600). What is the ending inventory value at cost?

Answer 1

To determine the ending inventory value at cost, calculate the cost of goods available for sale and subtract the cost of goods sold.

Step-by-step explanation:

To determine the ending inventory value at cost, we need to calculate the cost of goods available for sale and subtract the cost of goods sold. The cost of goods available for sale is the sum of the beginning inventory at cost, purchases at cost, and freight-in. In this case, the cost of goods available for sale is $531,200 + $2,137,200 + $127,800 = $2,796,200.

The cost of goods sold is the cost of goods available for sale minus the ending inventory at cost. The sales and net markups/markdowns are not relevant for calculating the ending inventory at cost. Therefore, the ending inventory value at cost is $2,796,200 - cost of goods sold.