retail_method_solution

# retail_method_solution - 3,000 Less Markup(3,000 x 34(1,020...

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Solution : The retail method The Home Square Corporation compiled the following inventory data at December 31, 2010: At cost At retail Beginning inventory 3,500 6,000 Purchases 53,000 80,000 Sales 83,000 Required : Compute Home Square’s ending inventory at December 31, 2010 using the retail method. At cost At retail Beginning inventory 3,500 6,000 Purchases 53,000 80,000 Goods available for sale 56,500 86,000 Less: Sales (83,000) Ending inventory at retail
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Unformatted text preview: 3,000 Less: Markup (3,000 x 34%) (1,020) Ending inventory at cost 1,980 Markup = 29,500 (86,000 – 56,500) Markup % = 34% (29,500/86,000) Assumptions: (1) Items in ending inventory are sufficiently homogeneous – same mark-up & same proportion in ending inventory & goods available for sale. (2) The cost-to-retail percentage remains relatively constant over time (or changes in retail prices parallel changes in costs)....
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