At December 31, 2019, the following information was available from Crisford Company’s books:
Sales for the year totaled $110,600; markdowns amounted to $1,400. Under the approximate lower of average cost or market retail method, Crisford’s inventory at December 31, 2019, was:
Calculate the C’s inventory at December 31, 2019 using market retail method.
Retail inventory method: It takes into account all the retail amounts that is, the current selling prices. Under this method, the goods available for sale, at retail is deducted from the sales, at retail to determine the ending inventory, at retail.
Conventional Retail Method: Conventional retail method refers to the estimation of the lower of average cost or market by eliminating the markdowns from the calculation of the cost-to-retail percentage.
In this case, the cost-to-retail percentage will be determined by dividing the goods available for sale at cost by the goods available for at retail (excluding markdowns). Thus, the conventional retail method will always result in lower estimation of ending inventory when the markdowns exist.
Calculate the C’s inventory at December 31, 2019 using market retail method:
Details | Cost ($) | Retail ($) |
Beginning inventory | 14,700 | 20,300 |
Add:Â Net purchase | 83,300 | 115,500 |
         Net additional markups | 0 | 4,200 |
Goods available for sale - before markdowns | 98,000 | 140,000 |
 | ||
Less: Net markdowns | 0 | -1,400 |
Goods available for sale- after markdowns | 98,000 | 138,600 |
Less:Â Net sales | Â | -110,600 |
Estimated ending inventory at retail | Â | $28,000 |
Estimated ending inventory at cost | $19,600 | Â |
Table (1)
Hence, the inventory at December 31, 2019 is $19,600.
Working notes:
Calculate cost-to-retail percentage...
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