Talkington Rae Company reports goods available for sale at cost $76800. Beginning inventory at retail is $40000 and goods purchased during the period at retail were $80000. Sales for the period amounted to $85000.
Instructions
Determine the estimated cost of the ending inventory using the retail inventory method.

Question

Melody Francis · Accepted Answer

Final Answer :   At Cost   At Retail   Beginning inventory  $ 40 , 000  Goods purchased  $ 80 , 000 ‾  Goods available for sale  $ 76 , 800 120 , 000  Net sales  85 , 000 ‾  Ending inventory  $ 35 , 000 ‾ \begin{array} { l r r }  & 	ext { At Cost }  &  	ext { At Retail }\	ext { Beginning inventory }  & & \$40,000  \	ext { Goods purchased }  &   &   \underline{\$8 0,000 }\	ext { Goods available for sale }  &  \$ 76,800  &  120,000 \	ext { Net sales }  &   &  \underline{ 85,000 }\	ext { Ending inventory }  &   &   \underline{\$35,000} \\end{array}  Beginning inventory   Goods purchased   Goods available for sale   Net sales   Ending inventory  ​  At Cost  $76 , 800 ​  At Retail  $40 , 000 $80 , 000 ​ 120 , 000 85 , 000 ​ $35 , 000 ​ ​   First calculate the cost to retail ratio.$76800 ÷ $120000 = 64%Apply this ratio to the ending inventory at retail.$35000 × .64 = $22400$22400 is the estimated cost of the ending inventory.

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