Harmes Company is a clothing store that uses the retail inventory method. The following information relates to its operations during the year: Inventory, January 1 Purchases Markups (net) Markdowns (net) Sales Required: Cost Retail $32,500 $65,000 130,000 215,667 3,000 - 2,000 190,000 1. Compute the ending inventory by the retail inventory method for the following cost flow assumption: FIFO. Round the cost-to-retail ratio to three decimal places. HARMES COMPANY Calculation of ending inventory by retail inventory method FIFO Cost Retail Purchases 130,000 $ 215,667 Add: Markups (net) 3,000 Less: Markdowns (net) 2,000 130,000 216,667 Cost-to-retail ratio: Beginning inventory 32,500 65,000 130,000 216,667 Cost-to-retail ratio: Beginning inventory 32,500 65,000 Goods available for sale Less: Sales 190,000 Ending inventory 2. Compute the ending inventory by the retail inventory method for the following cost flow assumption: Average cost. Round the cost-to-retail ratio to three decimal places. HARMES COMPANY Calculation of ending inventory by retail inventory method Beginning inventory Purchases Less: Markdowns (net) Less: Markups (net) Goods available for sale Average Cost Cost Retail $

Harmes Company is a clothing store that uses the retail inventory method. The following information relates to its operations during the year: Inventory, January 1 Purchases Markups (net) Markdowns (net) Sales Required: Cost Retail $32,500 $65,000 130,000 215,667 3,000 - 2,000 190,000 1. Compute the ending inventory by the retail inventory method for the following cost flow assumption: FIFO. Round the cost-to-retail ratio to three decimal places. HARMES COMPANY Calculation of ending inventory by retail inventory method FIFO Cost Retail Purchases 130,000 $ 215,667 Add: Markups (net) 3,000 Less: Markdowns (net) 2,000 130,000 216,667 Cost-to-retail ratio: Beginning inventory 32,500 65,000 130,000 216,667 Cost-to-retail ratio: Beginning inventory 32,500 65,000 Goods available for sale Less: Sales 190,000 Ending inventory 2. Compute the ending inventory by the retail inventory method for the following cost flow assumption: Average cost. Round the cost-to-retail ratio to three decimal places. HARMES COMPANY Calculation of ending inventory by retail inventory method Beginning inventory Purchases Less: Markdowns (net) Less: Markups (net) Goods available for sale Average Cost Cost Retail $

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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	Cost	Retail
Inventory, January 1	$32,500	$65,000
Purchases	130,000	215,667
Markups (net)	—	3,000
Markdowns (net)	—	2,000
Sales	—	190,000

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