Question

Ivanhoe uses the conventional retail method to determine its ending inventory at cost. Assume the beginning inventory at cost (retail) were $380000 ($584000), purchases during the current year at cost (retail) were $1855000 ($3100000), freight-in on these purchases totaled $119000, sales during the current year totaled $2800000, and net markups (markdowns) were $62000 ($98000). What is the ending inventory value at cost

Answer 1

Answer:

$532,883.2

Explanation:

Calculation for the ending inventory value at cost

First step is to calculate for retail

Beginning inventory at retail $584,000

Purchases current year at retail $3,100,000

Net markups $62,000

Sales ($2,800,000)

Markdown ($98,000)

=$848,000

Second step is to divide cost by retail

Beginning inventory at cost $380,000

Purchases current year at cost $1,855,000

Freight-in $119,000

Total $2,354,000

÷

Beginning inventory at retail $584,000

Purchases current year at retail $3,100,000

Net markups $62,000

Total =$3,746,000

Hence,

$2,354,000÷$3,746,000

=0.6284

Last step is to find the ending inventory value at cost

Ending inventory value=$848,000*0.6284

Ending inventory value=$532,883.2

Therefore the ending inventory value at cost is $532,883.2