Question

BE9-8 Boyne Inc. had a beginning inventory of $12,000 at a cost and $20,000 at retail. Net purchases were $120,000 at cost and $170,000 at retail. Net markups were $10,000; net markdowns were $7,000; and sales revenue was $147,000. Compute ending inventory at cost using the conventional retail method.

Answer 1

The conventional retail method is used to determine ending inventory at cost. To calculate this, we need to find the cost-to-retail ratio and apply it to the ending inventory at retail value.

Step-by-step explanation:

The conventional retail method is used to determine the ending inventory at cost by estimating the cost based on the retail value of the inventory. To compute the ending inventory at cost, we need to calculate the cost-to-retail ratio and apply it to the ending inventory at retail.

Cost-to-retail ratio = Cost of beginning inventory / Retail value of beginning inventory = $12,000 / $20,000 = 0.6

Ending inventory at cost = Ending inventory at retail x Cost-to-retail ratio = $25,000 x 0.6 = $15,000