The solution for your second mcq

cost to retail percentage is 60,000 / 100,000 = 60%

60,000 is given and

this is how I got  100,000

110,000 + 10,000 -20,000 = 100,000

adding beginning inventory gives 100,000 + 30,000 = 130,000

minus sales = 130,000 - 90,000 = 40,000

Estimated ending inventory of cost = 60% X 40,000 = 24,000

Hope this helps.

I am giving working for second problem

                         Cost         &n bsp;         &n bsp; retail

Beg Inv    12000                              30000

Purchases  60000                            110000

add markup                                       10000

less markdown                                    20000

Total purchases  60000         & nbsp;         100000

% of cost to retail 60000/100000*100=60%

ending inventory retail = 30000+100000-90000=40000

ending inv cost= 40000*60%=24000

In the first problem,beginning inventory is missing.

Thanks

desiga 

In the first Question Begfinning inventory is given ?

Beginning inventory and
purchases $600,000 $920,000

I figured out the first problem

                                          Cost        &n bsp;         Retail

Beg inv &Purchases       &nbs p;   600000                920000

Add mark ups                                                   40000

% cost to retail 600000/960000*100=62.5%

Less mark down                                              60000

Less Sales                                                   780000

Ending inv retail= 920+40-60-780=120000

Ending inv cost=120000*62.5%=75000

Cost of sales=Purchases-end inv=600000-75000=525000

Thanks

desiga

In the questions presented, both companies are using the Retail Method to estimate the ending inventory at cost.  Essentially, this is calculated in the following order:

1. Calculate the cost of goods available for sale at cost and retail
2. Calculate the estimated ending inventory at retail
3. Calculate the cost-to-retail ratio using step 1
4. Multiply the ratio by the ending inventory at retail to get the estimated ending inventory at cost.

From the these steps, cost and retail figures need to be given, hence the above data.

Bear in mind that there are several inventory methods that could be used to arrive at the estimated ending inventory at cost: (1) Conventional Retail Method also known as Lower-of-cost-or market (LCM) (as in MCQ 1), (2) FIFO Method, (3) LIFO Method, (4) Dollar-Value LIFO Method, however, only the first two have been examined under the old CPA examination.

MCQ 1 (LCM): Remember the basic formula:

Beg Inv + Pur = Cost of goods available - End Inv = COGS

                    = 600K (given) -75K (calculated) = 525K

MCQ 2: (FIFO): Under the FIFO method, beginning inventory was not included to calculate the cost-to-retail ratio (%) but was included under the LCM method.  Markdowns were included (subtracted) in the cost-to-retail ratio but was not included under the LCM method.