Phillips Supply uses a periodic inventory system but needs to determine the approximate amountof inventory at the end of each month without taking a physical inventory. Phillips has provided thefollowing inventory data: EXERCISE 8.10Estimating Inventoryby the Retail MethodEEbLO6 RetailCost SellingPrice PriceInventory of merchandise, June 30. . . . . . . . . . . . . . . . . . . . . . . . . . . . $300,000 $500,000Purchases during July . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 222,000 400,000Goods available for sale during July. . . . . . . . . . . . . . . . . . . . . . . . . . . $522,000 $900,000Net sales during July . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $600,000a. Estimate the cost of goods sold and the cost of the July 31 ending inventory using the retailmethod of evaluation.b. Was the cost of Phillips’s inventory, as a percentage of retail selling prices, higher or lower inJuly than it was in June? Explain.
Phillips Supply uses a periodic inventory system but needs to determine the approximate amount
of inventory at the end of each month without taking a physical inventory. Phillips has provided the
following inventory data:
EXERCISE 8.10
Estimating Inventory
by the Retail Method
E
E
b
LO6
Retail
Cost Selling
Price Price
Inventory of merchandise, June 30. . . . . . . . . . . . . . . . . . . . . . . . . . . . $300,000 $500,000
Purchases during July . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 222,000 400,000
Goods available for sale during July. . . . . . . . . . . . . . . . . . . . . . . . . . . $522,000 $900,000
Net sales during July . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $600,000
a. Estimate the cost of goods sold and the cost of the July 31 ending inventory using the retail
method of evaluation.
b. Was the cost of Phillips’s inventory, as a percentage of retail selling prices, higher or lower in
July than it was in June? Explain.
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