Chapter 6, Problem 6.7APR

(a)

To determine

Retail method

This method of estimating cost of inventory requires cost and retail prices to be maintained for goods available for sale. The ending inventory cost is estimated by converting ending inventory at retail using ratio of cost to retail price.

Gross profit method

This method is use the estimated gross profit for the period to evaluate and ascertain the ending inventory for the period. The gross profit for the period is calculated from the preceding year, which is adjusted for any current period changes in the sales and cost price of the inventory.

To estimate: the cost of merchandise inventory at August 31 of CT company.

(2) (a)

To determine

To estimate: the cost of merchandise inventory as on November 30 of R Company.

(b)

To determine

To estimate: the loss of inventory due to theft or damage during March through November.