Crosby Department Store estimates inventory by using the retail inventory method. The following information was developed: At Cost ‾ At Retail ‾ Beginning inventory $ 465 , 000 $ 750 , 000 Goods purchased 900 , 000 1 , 350 , 000 Net sales 1 , 500 , 000 \begin{array}{lrr} & \underline{ ext {At Cost}} & \underline{ ext {At Retail}}\ ext { Beginning inventory } & \$ 465,000 & \$750,000\ ext { Goods purchased } & 900,000 & 1,350,000 \ ext { Net sales } & & 1,500,000\end{array} Beginning inventory Goods purchased Net sales At Cost $465 , 000 900 , 000 At Retail $750 , 000 1 , 350 , 000 1 , 500 , 000 The estimated cost of the ending inventory isA) $210000.B) $372000.C) $390000.D) $400000.

Question

Crosby Department Store estimates inventory by using the retail inventory method. The following information was developed:   At Cost ‾ At Retail ‾  Beginning inventory  $ 465 , 000 $ 750 , 000  Goods purchased  900 , 000 1 , 350 , 000  Net sales  1 , 500 , 000 \begin{array}{lrr} &  \underline{	ext {At Cost}} &  \underline{	ext {At Retail}}\	ext { Beginning inventory }  &  \$ 465,000  &  \$750,000\	ext { Goods purchased }  &  900,000  &  1,350,000 \	ext { Net sales }  &   &  1,500,000\end{array}  Beginning inventory   Goods purchased   Net sales  ​ At Cost ​ $465 , 000 900 , 000 ​ At Retail ​ $750 , 000 1 , 350 , 000 1 , 500 , 000 ​ The estimated cost of the ending inventory isA)  $210000.B)  $372000.C)  $390000.D)  $400000.

Beldon Glasgow · Accepted Answer

Final Answer : C, Explanation :  The estimated cost of the ending inventory is $390,000. This is calculated by multiplying the ending inventory at retail by the cost-to-retail ratio. The cost-to-retail ratio is calculated by dividing the cost of goods available for sale by the retail value of goods available for sale. In this case, the cost of goods available for sale is $1,365,000 (beginning inventory + goods purchased) and the retail value of goods available for sale is $2,100,000 (beginning inventory + goods purchased + net sales). Therefore, the cost-to-retail ratio is 65% ($1,365,000/$2,100,000). The ending inventory at retail is $600,000 (net sales - beginning inventory). Therefore, the estimated cost of the ending inventory is $390,000 ($600,000 x 65%).

Definitions

Learning Objectives

Learning Objectives

Related questions