Question

Clooney Department Store estimates inventory by using the retail inventory method. The following information was developed:

At Cost At Retail
Beginning inventory $360,000 $750,000
Goods purchased 900,000 1,350,000
Net sales 1,400,000

The estimated cost of the ending inventory is:__________

Answer 1

Answer:

$420,000

Explanation:

The estimated cost of inventory is calculated as;

= (Beginning inventory at cost + purchases at cost ) ÷ (Beginning inventory at retail + Purchases at retail)

= ($360,000 + $900,000) ÷ ($750,000 + $1,350,000)

= 0.60; ($2,100,00 - $1,400,000) × 0.60

= $420,000

Therefore, the estimated cost of the ending inventory is $420,000