Retail method; gross profit method Selected data on inventory, purchases, and sales for Celebrity Tan Co. and Ranchworks Co. are as follows: Cost Retail Celebrity Tan Co. Inventory, August 1 $300,000 $575,000 Transactions during August: Purchases (net) 2,021,900 3,170,000 Sales 3,250,000 Ranchworks Co. Inventory, March 1 $880,000 Transactions during March through November: Purchases (net) 9,500,000 Sales 15,800,000 Estimated gross profit rate 38% Required: 1. Determine the estimated cost of the inventory of Celebrity Tan Co. on August 31 by the retail method, presenting details of the computations. For those boxes in which you must enter subtracted or negative numbers use a minus sign. 2a. Estimate the cost of the inventory of Ranchworks Co. on November 30 by the gross profit method, presenting details of the computations. For those boxes in which you must enter subtracted or negative numbers use a minus sign. 2b. Assume that Ranchworks Co. took a physical inventory on November 30 and discovered that $369,750 of inventory was on hand. What was the estimated loss of inventory due to theft or damage during March through November? $__________

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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Retail method; gross profit method

Selected data on inventory, purchases, and sales for Celebrity Tan Co. and Ranchworks Co. are as follows:

Cost		Retail
Celebrity Tan Co.
Inventory, August 1	$300,000		$575,000
Transactions during August:
Purchases (net)	2,021,900		3,170,000
Sales			3,250,000

Ranchworks Co.
Inventory, March 1	$880,000
Transactions during March through November:
Purchases (net)	9,500,000
Sales	15,800,000
Estimated gross profit rate	38%

Required:

1. Determine the estimated cost of the inventory of Celebrity Tan Co. on August 31 by the retail method, presenting details of the computations. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

2a. Estimate the cost of the inventory of Ranchworks Co. on November 30 by the gross profit method, presenting details of the computations. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

2b. Assume that Ranchworks Co. took a physical inventory on November 30 and discovered that $369,750 of inventory was on hand. What was the estimated loss of inventory due to theft or damage during March through November?
$__________

Retail method; gross profit method
Selected data on inventory, purchases, and sales for Celebrity Tan Co. and Ranchworks Co. are as follows:
Cost
Retail
Celebrity Tan Co.
Inventory, August 1
$300,000
$575,000
Transactions during August:
Purchases (net)
2,021,900
3,170,000
Sales
3,250,000
Ranchworks Co.
Inventory, March 1
$880,000
Transactions during March through November:
Purchases (net)
9,500,000
Sales
15,800,000
Estimated gross profit rate
38%
Required:
1. Determine the estimated cost of the inventory of Celebrity Tan Co. on August 31 by the retail method, presenting details of the computations. For those boxes in which you must enter subtracted or negative numbers use a minus sign.
Celebrity Tan Co.
Estimated Cost of Inventory
August 31
Cost
Retail
Ratio of cost to retail price:
%
2a. Estimate the cost of the inventory of Ranchworks Co. on November 30 by the gross profit method, presenting details of the computations. For those boxes in which you must enter subtracted or negative numbers use a minus sign.
Ranchworks Co.
Estimated Cost of Inventory
November 30
Cost
$
2b. Assume that Ranchworks Co. took a physical inventory on November 30 and discovered that $369,750 of inventory was on hand. What was the estimated loss of inventory due to theft or damage during March through November?

Expert Solution

Step 1

Under the retail inventory method, the cost to retail price ratio is calculated and thus adjusted against sales.

Under the gross profit method, gross profit is adjusted.

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