The retail amount should be $1,035,000, excluding net markdowns. C) The cost and retail amounts should not include beginning inventory of $100,000 and $150,000, respectively. D) The retail amount should be $950,000, excluding net markups and net markdowns.
The retail amount should be $1,035,000, excluding net markdowns. C) The cost and retail amounts should not include beginning inventory of $100,000 and $150,000, respectively. D) The retail amount should be $950,000, excluding net markups and net markdowns.
Chapter18: Accounting Periods And Methods
Section: Chapter Questions
Problem 67P
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Question
.5.A company using the conventional retail method has the following information for the current year's operations:
Cost Retail
Beginning inventory $ 100,000 $ 150,000
Purchases 500,000 800,000
Net markups 85,000
Net markdowns 35,000
Net sales 750,000
Management calculates the cost-to-retail percentage as 60%, equal to cost of $600,000 ($100,000 + $500,000) divided by retail of $1,000,000 ($150,000 + $800,000 + $85,000 – $35,000). Which of the following statements is correct?
A) The cost-to-retail percentage should be calculated as cost of $600,000 divided by retail of $750,000 (Net sales).
B) The retail amount should be $1,035,000, excluding net markdowns.
C) The cost and retail amounts should not include beginning inventory of $100,000 and $150,000, respectively.
D) The retail amount should be $950,000, excluding net markups and net markdowns.
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