Inventory, October 1, 2021: At cost At retail Purchases (exclusive of freight and returns): At cost At retail Freight-in Purchase returns: At cost At retail Additional markups Markup cancellations Markdowns (net) Normal spoilage and breakage Sales Sales returns Beginning inventory Add: Purchases Add: Freight-in Less: Purchase returns Add: Net markups Goods available for sale (excluding net markdowns) Cost-to-retail percentage Less: Net markdowns Goods available for sale (including net markdowns) Less: Normal spoilage Less: Sales Less: Sales returns Required: 1. Using the conventional retail method, prepare a schedule computing estimated lower of cost or market (LCM) inventory for October 31, 2021. (Round your cost-to-retail percentage to 2 decimal places (i.e., 0.1234 should be entered as 12.34) and round your final answers to the nearest whole dollar.) Estimated ending inventory at retail Estimated ending inventory at cost 15.5 S $ Cost 30,000 40,000 113,510 156,500 6,100 146,510 3,100 3,800 3,500 200 900 5,500 149,000 3,270 30,000 $ 113,510 6,100 3,100 $ Retail 40,000 156,500 3,800 3,300 196,000 900 195,100 5,500 $ 149,000 3,270 145,730 Cost-to-Retail Ratio 74.75%

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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### Inventory and Cost-to-Retail Analysis

**Inventory, October 1, 2021:**
- **At cost:** $30,000
- **At retail:** $40,000

**Purchases (exclusive of freight and returns):**
- **At cost:** $113,510
- **At retail:** $156,500

**Freight-in:** $6,100

**Purchase Returns:**
- **At cost:** $3,100
- **At retail:** $3,800

**Additional Markups:** $3,500

**Markup Cancellations:** $200

**Markdowns (net):** $900

**Normal Spoilage and Breakage:** $5,500

**Sales:** $149,000

**Sales Returns:** $3,270

---

#### Required:
1. **Objective:** Using the conventional retail method, prepare a schedule to compute the estimated lower of cost or market (LCM) inventory for October 31, 2021.

   *(Round your cost-to-retail percentage to 2 decimal places and round your final answers to the nearest whole dollar.)*

### Schedule:

| Cost | Retail | Cost-to-Retail Ratio |
|------|--------|-----------------------|
| **Beginning Inventory** | $30,000 | $40,000 |
| **Add: Purchases** | $113,510 | $156,500 |
| **Add: Freight-in** | $6,100 | |
| **Less: Purchase Returns** | $3,100 | $3,800 |
| | | |
| **Add: Net Markups** | | $3,300 |
| | | |
| **Goods Available for Sale (excluding net markdowns)** | $146,510 | $196,000 |
| **Cost-to-retail percentage** | | **74.75%** |
| **Less: Net Markdowns** | | $900 |
| | | |
| **Goods Available for Sale (including net markdowns)** | | $195,100 |
| **Less: Normal Spoilage** | | $5,500 |
| **Less: Sales** | | $149,000 |
| **Less: Sales Returns** | | $3,270 |
| | | |
| **Estimated Ending Inventory at Retail** | | $145,730 |
| **Estimated Ending Inventory at Cost** | | |

**Graphs/Diagrams**:
-
Transcribed Image Text:### Inventory and Cost-to-Retail Analysis **Inventory, October 1, 2021:** - **At cost:** $30,000 - **At retail:** $40,000 **Purchases (exclusive of freight and returns):** - **At cost:** $113,510 - **At retail:** $156,500 **Freight-in:** $6,100 **Purchase Returns:** - **At cost:** $3,100 - **At retail:** $3,800 **Additional Markups:** $3,500 **Markup Cancellations:** $200 **Markdowns (net):** $900 **Normal Spoilage and Breakage:** $5,500 **Sales:** $149,000 **Sales Returns:** $3,270 --- #### Required: 1. **Objective:** Using the conventional retail method, prepare a schedule to compute the estimated lower of cost or market (LCM) inventory for October 31, 2021. *(Round your cost-to-retail percentage to 2 decimal places and round your final answers to the nearest whole dollar.)* ### Schedule: | Cost | Retail | Cost-to-Retail Ratio | |------|--------|-----------------------| | **Beginning Inventory** | $30,000 | $40,000 | | **Add: Purchases** | $113,510 | $156,500 | | **Add: Freight-in** | $6,100 | | | **Less: Purchase Returns** | $3,100 | $3,800 | | | | | | **Add: Net Markups** | | $3,300 | | | | | | **Goods Available for Sale (excluding net markdowns)** | $146,510 | $196,000 | | **Cost-to-retail percentage** | | **74.75%** | | **Less: Net Markdowns** | | $900 | | | | | | **Goods Available for Sale (including net markdowns)** | | $195,100 | | **Less: Normal Spoilage** | | $5,500 | | **Less: Sales** | | $149,000 | | **Less: Sales Returns** | | $3,270 | | | | | | **Estimated Ending Inventory at Retail** | | $145,730 | | **Estimated Ending Inventory at Cost** | | | **Graphs/Diagrams**: -
Expert Solution
Step 1

Workings :-

1) Calculation of net markups :- 

Additional markups - markup cancellations

= $3,500 - $200 

= $3,300

steps

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