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Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447

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BuyFindarrow_forward

Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447
Textbook Problem

Using the retail method, estimate the value of the ending inventory at cost on May 31 from the following information for Fortune Industries, Inc. Round the cost ratio to the nearest tenth of a percent.

Fortune Industries, Inc. May 1-May 31

Cost Retail
Beginning Inventory, May 1 $145,600 $196,560
Purchases 79,000 106,650
Net Sales $210,800

To determine

To calculate: The value of the ending inventory at cost on May 31 from the following information for Fortune Industries, Inc. with the help of the retail method and round the cost ratio to the nearest tenth of a percent.

Fortune Industries, Inc.May1May31CostRetailBeginning Inventory, May1$145,600$196,560Purchases79,000106,650Net Sales$210,800

Explanation

Given Information:

Fortune Industries, Inc.May1May31CostRetailBeginning Inventory, May1$145,600$196,560Purchases79,000106,650Net Sales$210,800

Formula used:

Step 1: The goods available for sale is given by:

Goods Available for Sale = Beginning Inventory + Net Purchased

Step 2: The cost ratio is given by:

Cost ratio = Goods available for sale at costGoods available for sale at retail

Step 3: The Ending inventory at retail is given by:

Ending Inventory at retail = Goods available for sale at retail  Net sales

Step 4: The Ending inventory at cost is given by:

Ending inventory at cost = Ending inventory at retail × Cost ratio

Calculation:

List the beginning inventory and purchases and calculate the goods available for sale.

Add purchases and beginning inventory to determine goods available for sale at both cost and retail.

CostRetailBeginning Inventory, May 1$145,600$196,560+Net Purchase+79,000<

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