Exercise 9-13 (Algo) Retail inventory method; average cost [LO9-3] San Lorenzo General Store uses a periodic inventory system and the retail inventory method to estimate ending inventory and cost of goods sold. The following data are available for the month of October Beginning inventory Net purchases Net markups Net narkdowns Net sales Required: Complete the table below to estimate the average cost of ending inventory and cost of goods sold for October using the information provided. Beginning inventory Net purchases Net markups Net markdowns Cost $ 44,000 11,410 Note: Round ratio calculation to 2 decimal places (.e., 0.1234 should be entered as 12.34%). Enter amounts to be deducted with a minus sign. Goods available for sale Cost-to-retail percentage Net sales Retail $ 59,000 32,500 2,100 1,250 41,000 Estimated ending inventory at retail Estimated ending inventory at cost Estimated cost of goods sold $ Cost 44,000 $ Retail 59,000 Cost-to-Retail Ratio %

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Inventory Valuation

Before discussing the topic inventory valuation let’s discuss the meaning of inventory. In accounting, inventory is also known as stock. Inventory means all the finished goods, materials, merchandise that a business holds for the purpose of selling it in the market with the motive of earning profit.