You have been asked by your boss to compute the ending inventory using the retail method. Explain the steps that you would use in calculating this. retail method3Accounting Inventory SystemRetail method• Values merchandise at current retail prices, whichis then converted to cost based on a formula• Basic steps• Calculation of the cost complement• Cost complement = Total cost valuation/ Total retailvaluation• Calculation of reductions from retail value• Conversion of the adjusted retail book inventory tocost• Closing inventory = Adjusted retail X Cost complementbook inventoryAccounting Inventory System• Advantages of the retail method over the costmethod of inventory valuation:• Accounting statements can be drawn up at anytime• Inventories need not be taken for preparationPhysical inventories using retail prices:• Are less subject to error• Can be completed in a shorter amount of time• Provides an automatic, conservative valuation ofending inventory as well as inventory levelsLO 3Accounting Inventory System●Disadvantages of the retail method• Method of averages• Closing inventory is valued at the average relationshipbetween eat and retailLO 3

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Description: You have been asked by your boss to compute the ending inventory using the retail method. Explain the steps that you would use in calculating this. retail method3Accounting Inventory SystemRetail method• Values merchandise at current retail prices, w

Inventory is the good which are the products which company have for the purpose of sale by the…

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Business

Accounting

compute the ending inventory using the retail method. Explain the steps that you would use in calculating this.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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