Judy Company uses the retail inventory method to approximate its ending inventory. The following information is available for the current year:
Judy Company uses the retail inventory method to approximate its ending inventory. The following information is available for the current year:
Chapter1: Financial Statements And Business Decisions
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
Transcribed Image Text:Judy Company uses the retail inventory method to approximate its ending inventory. The following
information is available for the current year:
Cost
Retail
Beginning inventory
650,000
1,200,000
Purchases
9,000,000
14,700,000
Freight in
200,000
300,000
Purchase returns
500,000
Purchase allowance
150,000
200,000
Departmental transfer in
Net markups
300,000
300,000
Net markdowns
1,000,000
Sales
11,500,000
Sales discounts
100,000
Employee discounts
500,000
Questions:
• What should be reported as the estimated cost of ending inventory using the lower of average cost
or market?
• What should be reported as estimated cost of ending inventory using the average cost approach on
applying retail inventory?
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