Retail Inventory Method The Red Department Store uses the retail inventory method. Information relating to the computation of the inventory at December 31, 2007 is as follows:

Cost

Retail

Cost

Retail

Inventory at January 1, 2007

$32,000

$80,000

Markups

$60,000

Sales

600,000

Markup cancellations

10,000

Purchases

270,000

590,000

Markdowns

25,000

Freight in

7,600

Markdown cancellations

5,000

Estimated normal shrinkage is

2% of sales.

Required

Prepare a schedule to calculate the estimated ending inventory at the lower of average cost or market at December 31, 2007, using the retail inventory method. Show supporting computations in good form.