(Retail Inventory Method) Presented below is information related to McKenna Company.
|
Cost |
Retail |
|
|
Beginning inventory |
$58,000 |
$100,000 |
|
Purchases (net) |
122,000 |
200,000 |
|
Net markups |
20,000 |
|
|
Net markdowns |
30,000 |
|
|
Sales |
186,000 |
Instructions
(a) Compute the ending inventory at retail.
(b) Compute a cost to retail percentage (round to two decimals) under the following conditions.
(1) Excluding both markups and markdowns.
(2) Excluding markups but including markdowns.
(3) Excluding markdowns but including markups.
(4) Including both markdowns and markups.
(c) Which of the methods in (b) above (1, 2, 3, or 4) does the following?
(1) Provides the most conservative estimate of ending inventory.
(2) Provides an approximation of lower of cost or market.
(3) Is used in the conventional retail method.
(d) Compute ending inventory at lower of cost or market (round to nearest dollar).
(e) Compute cost of goods sold based on (d).
(f) Compute gross profit based on (d).