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 MethodNorthern 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 $328,914.30To 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 = $756,0002. **Calculate the Cost-to-Retail Ratio:** - **Cost-to-Retail Ratio:** $579,640 / $756,000 ≈ 0.76673. **Calculate the Ending Inventory at Retail:** - **Sales for May:** $429,000 - **Ending Inventory (Retail):** Total Retail - Sales = $756,000 - $429,000 = $327,0004. **Estimate the Ending Inventory at Cost:** - **Ending Inventory (Cost):** Ending Inventory at Retail * Cost-to-Retail Ratio - **Ending Inventory (Cost):** $327,000 * 0.7667 ≈ $250,710.90Based on these calculations, the estimated value of the inventory as of May 31 is **$250,710.90**.

Introduction:- Retail method is used by retailers that resell merchandise to make an estimation of…

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)

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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