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.