Chapter 9, Problem 9.17E

Conventional retail method; employee discounts

• LO9–3, LO9–4

LeMay Department Store uses the retail inventory method to estimate ending inventory for its monthly financial statements. The following data pertain to one of its largest departments for the month of March 2018:

	Cost	Retail
Beginning inventory	$ 40,000	$ 60,000
Purchases	207,000	400,000
Freight-in	14,488
Purchase returns	4,000	6,000
Net markups		5,800
Net markdowns		3,500
Normal breakage		6,000
Net sales		280,000
Employee discounts		1,800

Sales are recorded net of employee discounts.

Required:

1. Compute estimated ending inventory and cost of goods sold for March applying the conventional retail method.

2. Recompute the cost-to-retail percentage using the average cost method.