Chapter 9, Problem 9.6P

1.

To determine

Retail inventory method: It takes into account all the retail amounts that is, the current selling prices. Under this method, the goods available for sale, at retail is deducted from the sales, at retail to determine the ending inventory, at retail.

Average cost: It is a method of determining the cost-to retail percentage for all the goods available for sale.

To Calculate: The amount of ending inventory and cost of goods sold.

2.

To determine

Conventional Retail Method: Conventional retail method refers to the estimation of the lower of average cost or market by eliminating the markdowns from the calculation of the cost-to-retail percentage.

In this case, the cost-to-retail percentage will be determined by dividing the goods available for sale at cost by the goods available for at retail (excluding markdowns). Thus, the conventional retail method will always result in lower estimation of ending inventory when the markdowns exist.

To Calculate: The amount of ending inventory and cost of goods sold.