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 Topic: Cost Retail Inventory Method ( Topic Closed)
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ay435
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Joined: 01 Jul 2010
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Posts: 14
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| Posted: 01 Jul 2010 at 16:03 | IP Logged
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I think the follow is wrong from 2009 becker's chapter 4 supplement hw readings pg 69, shouldn't mark downs be excluded from the calculation of the cost to retail ratio like on page 66? Any thoughts ?
Cost Retail Inventory Method
Under the cost retail inventory method, the markdowns go above the "total available for
sale" line. Therefore, the result must be adjusted to "lower of cost or market."
At Cost At Retail
Beginning inventory $ 25,000 $ 39,000
Purchases 35,000 60,000
Markups -- 1,000
Markdowns -- (2,000)
Total available for sale $ 60,000 ÷ $ 98,000 = 61.22% cost complement
Sales -- (88,000)
Ending inventory at retail $ 10,000
Ending inventory at cost
($10,000 x 61.22%) $ 6,122
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1tryCPA
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| Posted: 01 Jul 2010 at 20:05 | IP Logged
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It's a conventional or lower of cost or market method. Under this method markdowns are included in calculation of the ratio. If the problem says that it's not adjusted to lower of cost or market, then, don't include the markdowns.
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ay435
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| Posted: 02 Jul 2010 at 00:00 | IP Logged
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any other thoughts?
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