Debbie’s Bling Shop uses the lower of average cost or market retail inventory method to determine its ending inventory. The accounting records for the current year for Debbie’s contained the following information: CostRetailBeginning inventory$19,000$ 27,500Purchases71,50094,000Sales 105,000Net markups 5,167Net markdowns 3,067In addition, the accounting records for Debbie’s disclosed that freight-in charges were $6,700 and sales returns were $2,833. What is the cost-to-retail percentage to be used for ending inventory calculations? a. 71.4% b. 73.2% c. 76.7% d. 78.6%

Name: Debbie’s Bling Shop uses the lower of average cost or market retail in
Uploaded: 2024-03-20T06:32:37.000Z
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Description: Debbie’s Bling Shop uses the lower of average cost or market retail inventory method to determine its ending inventory. The accounting records for the current year for Debbie’s contained the following information: CostRetailBeginning inventory$19,000

Formula: Cost to retail ratio = ( Cost of beginning inventory + purchases and freight charge ) / ( Retail beginning inventory + retail goods purchases ) Numerator value is the sum of beginning cost inventory , purchases and freight charge. Cost to retail ratio = ( Cost of beginning inventory +purchases and freight charge ) / ( Retail beginning inventory + retail goods purchases ) = ( 19000 + 71500 + 6700 ) / ( 27500 + 94000 + 5167 - 3067 ) = 97200 / 123600 = 78.64 % Hence, correct answer is option D ) 78.6 %

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Debbie’s Bling Shop uses the lower of average cost or market retail inventory method to determine its ending inventory. The accounting records for the current year for Debbie’s contained the following information:

	Cost	Retail
Beginning inventory	$19,000	$ 27,500
Purchases	71,500	94,000
Sales		105,000
Net markups		5,167
Net markdowns		3,067

In addition, the accounting records for Debbie’s disclosed that freight-in charges were $6,700 and sales returns were $2,833. What is the cost-to-retail percentage to be used for ending inventory calculations?

	a.	71.4%
	b.	73.2%
	c.	76.7%
	d.	78.6%

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