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Northern Industries had sales of $429,000 in the month of May. Use the retail method to estimate the value of the inventory as of May 31 given the following financial information. (Round cost ratio to four decimal places)

Northern Industries had sales of $429,000 in the month of May. Use the retail method to estimate the value of the inventory as of May 31 given the following financial information. (Round cost ratio to four decimal places)

Intermediate Accounting: Reporting And Analysis
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter7: Inventories: Cost Measurement And Flow Assumptions
Section: Chapter Questions
Problem 12E: Alternative Inventory Methods Park Companys perpetual inventory records indicate the following...
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Northern Industries had sales of $429,000 in the month of May. Use the retail method to estimate the value of the inventory as of May 31 given the following financial information. (Round cost ratio to four decimal places)
### Estimating Inventory Value with the Retail Method Northern Industries had sales of $429,000 in the month of May. Use the retail method to estimate the value of the inventory as of May 31 given the following financial information. (Round cost ratio to four decimal places.) #### Northern Industries Financial Highlights | | COST | RETAIL | |-----------------------------------------|---------|-----------| | **May 1 to May 31** | | | | Beginning Inventory | $434,719 | $585,100 | | Net Purchases (May) | $144,921 | $170,900 | | **Total Available for Sale** | | | The following multiple-choice options are provided to estimate the value of the inventory: - Q $115,495.69 - Q $135,215.21 - Q $250,710.90 - Q $328,914.30 To estimate inventory value, follow these steps: 1. **Calculate the Total Available for Sale:** - **Cost:** - Beginning Inventory: $434,719 - Net Purchases (May): $144,921 - **Total Cost:** $434,719 + $144,921 = $579,640 - **Retail:** - Beginning Inventory: $585,100 - Net Purchases (May): $170,900 - **Total Retail:** $585,100 + $170,900 = $756,000 2. **Calculate the Cost-to-Retail Ratio:** - **Cost-to-Retail Ratio:** $579,640 / $756,000 ≈ 0.7667 3. **Calculate the Ending Inventory at Retail:** - **Sales for May:** $429,000 - **Ending Inventory (Retail):** Total Retail - Sales = $756,000 - $429,000 = $327,000 4. **Estimate the Ending Inventory at Cost:** - **Ending Inventory (Cost):** Ending Inventory at Retail * Cost-to-Retail Ratio - **Ending Inventory (Cost):** $327,000 * 0.7667 ≈ $250,710.90 Based on these calculations, the estimated value of the inventory as of May 31 is **$250,710.90**.
Transcribed Image Text:### Estimating Inventory Value with the Retail Method Northern Industries had sales of $429,000 in the month of May. Use the retail method to estimate the value of the inventory as of May 31 given the following financial information. (Round cost ratio to four decimal places.) #### Northern Industries Financial Highlights | | COST | RETAIL | |-----------------------------------------|---------|-----------| | **May 1 to May 31** | | | | Beginning Inventory | $434,719 | $585,100 | | Net Purchases (May) | $144,921 | $170,900 | | **Total Available for Sale** | | | The following multiple-choice options are provided to estimate the value of the inventory: - Q $115,495.69 - Q $135,215.21 - Q $250,710.90 - Q $328,914.30 To estimate inventory value, follow these steps: 1. **Calculate the Total Available for Sale:** - **Cost:** - Beginning Inventory: $434,719 - Net Purchases (May): $144,921 - **Total Cost:** $434,719 + $144,921 = $579,640 - **Retail:** - Beginning Inventory: $585,100 - Net Purchases (May): $170,900 - **Total Retail:** $585,100 + $170,900 = $756,000 2. **Calculate the Cost-to-Retail Ratio:** - **Cost-to-Retail Ratio:** $579,640 / $756,000 ≈ 0.7667 3. **Calculate the Ending Inventory at Retail:** - **Sales for May:** $429,000 - **Ending Inventory (Retail):** Total Retail - Sales = $756,000 - $429,000 = $327,000 4. **Estimate the Ending Inventory at Cost:** - **Ending Inventory (Cost):** Ending Inventory at Retail * Cost-to-Retail Ratio - **Ending Inventory (Cost):** $327,000 * 0.7667 ≈ $250,710.90 Based on these calculations, the estimated value of the inventory as of May 31 is **$250,710.90**.
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