Question Details

When you undertook the preparation of the financial statements 



Pr. 1—Gross profit method.
On December 31, 2010 Felt Company's inventory burned. Sales and purchases for the year had been $1,400,000 and $980,000, respectively. The beginning inventory (Jan. 1, 2010) was $170,000; in the past Felt's gross profit has averaged 40% of selling price.

Instructions
Compute the estimated cost of inventory burned, and give entries as of December 31, 2010 to close merchandise accounts.
Pr. 2—Retail inventory method.
When you undertook the preparation of the financial statements for Telfer Company at January 31, 2011, the following data were available:
		 At Cost		 At Retail	
	Inventory, February 1, 2010	$70,800	$  98,500
	Markdowns		35,000
	Markups		63,000
	Markdown cancellations		20,000
	Markup cancellations		10,000
	Purchases	219,500	294,000
	Sales		345,000
	Purchases returns and allowances	4,300	5,500
	Sales returns and allowances		10,000

Instructions
Compute the ending inventory at cost as of January 31, 2011, using the retail method which approximates lower of cost or net realizable value. Your solution should be in good form with amounts clearly labeled.



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