Dixon Books uses the retail inventory method to estimate its monthly ending inventories. The following information is available for two of its departments at October 31, 2014.
|
Hardcovers |
Paperbacks |
|||
|
Cost |
Retail |
Cost |
Retail |
|
|
Beginning inventory |
$ 420,000 |
$ 700,000 |
$ 280,000 |
$ 360,000 |
|
Purchases |
2,135,000 |
3,200,000 |
1,155,000 |
1,540,000 |
|
Freight in |
24,000 |
12,000 |
||
|
Purchase discounts |
44,000 |
22,000 |
||
|
Net sales |
3,100,000 |
1,570,000 |
||
At December 31, Dixon Books takes a physical inventory at retail. The actual retail values of the inventories in each department are Hardcovers $790,000 and Paperbacks $335,000.
Instructions
(a) Determine the estimated cost of the ending inventory for each department at October 31, 2014, using the retail inventory method.
(b) Compute the ending inventory at cost for each department at December 31, assuming the cost to retail ratios for the year are 65% for Hardcovers and 75% for Paperbacks.