Question Details

What is Drake- ending inventory at retail 



1.		Crane Sales Company uses the retail inventory method to value its merchandise inventory. The following information is available for the current year:
			   Cost		  Retail	
Beginning inventory	$  30,000	$  50,000
Purchases	145,000	200,000
Freight-in	2,500	—	
Net markups	—	8,500
Net markdowns	—	10,000
Employee discounts	—	1,000
Sales	—	205,000
If the ending inventory is to be valued at the lower-of-cost-or-net realizable value, what is the cost to retail ratio?
a.	$177,500 ÷ $250,000
b.	$177,500 ÷ $258,500
c.	$175,000 ÷ $260,000
d.	$177,500 ÷ $248,500

Use the following information for questions 2 through 3.

The following data concerning the retail inventory method are taken from the financial records of Welch Company.
			   Cost		  Retail	
	Beginning inventory	$  49,000	$  70,000
	Purchases	224,000	320,000
	Freight-in	6,000	—
	Net markups	—	20,000
	Net markdowns	—	14,000
	Sales		—	336,000

 
2.	The ending inventory at retail should be
a.	$74,000.
b.	$60,000.
c.	$64,000.
d.	$42,000.

3. 	If the ending inventory is to be valued at approximately the lower of cost or market, the calculation of the cost to retail ratio should be based on goods available for sale at (1) cost and (2) retail, respectively of
a.	$279,000 and $410,000.
b.	$279,000 and $396,000.
c.	$279,000 and $390,000.
d.	$273,000 and $390,000.

	4.	If the foregoing figures are verified and a count of the ending inventory reveals that merchandise actually on hand amounts to $54,000 at retail, the business has
a.	realized a windfall gain.
b.	sustained a loss.
c.	no gain or loss as there is close coincidence of the inventories.
d.	none of these.

	5.	Drake Corporation had the following amounts, all at retail:
Beginning inventory	$  3,600	Purchases	$120,000
Purchase returns	6,000	Net markups	18,000
Abnormal shortage	4,000	Net markdowns	2,800
Sales	72,000	Sales returns	1,800
Employee discounts	1,600	Normal shortage	2,600
What is Drake- ending inventory at retail ?
a.	$54,400.
b.	$56,000.
c.	$57,600.
d.	$58,400





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