1. What conditions must exist for the retail inventory method to provide valid results?
2. The conventional retail inventory method yields results that are essentially the same as those yielded by the lower of cost or market method. Explain. Prepare an illustration of how the retail inventory method reduces inventory to market.
3. (a) Determine the ending inventory under the conventional retail method for the furniture department of Mayron Department Stores from the following data.
|
Cost |
Retail |
|
|
Inventory, Jan. 1 |
$149,000 |
$283,500 |
|
Purchases |
1,400,000 |
2,160,000 |
|
Freight in |
70,000 |
|
|
Markups, net |
92,000 |
|
|
Markdowns, net |
48,000 |
|
|
Sales |
2,175,000 |
(b) If the results of a physical inventory indicated an inventory at retail of $295,000, what inferences would you draw?