(a)
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 February 28 of J company.
2
(a)
To estimate: the cost of merchandise inventory as on October 31 of C Company.
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Financial & Managerial Accounting
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