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Campbell Corporation uses the retail method to value its inventory. The following information is available for the year 2021: Cost Retail Merchandise inventory, January 1, 2021 $ 290,000 $ 290,000 Purchases 622,000 920,000 Freight-in 18,000 Net markups 30,000 Net markdowns 5,000 Net sales 900,000 Required: Determine the December 31, 2021, inventory by applying the conventional retail method using the information provided

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Answer:

Estimated ending inventory at retail $335,000

Estimated ending inventory at cost $251,250

Explanation:

Calculation to determine the December 31, 2021, inventory by applying the conventional retail method using the information provided

COST RETAIL

Merchandise inventory, January 1, 2021

$290,000 $ 290,000

Purchases $622,000 $920,000

Freight-in 18,000 $0

Net markups$0 30,000

Total $930,000 $1,240,000

Less Net markdowns $0 $5,000

Goods available for sale $930,000 $1,235,000

($930,000-$0=$930,000)

($1,240,000-$5,000=$1,235,000)

Cost-to-retail percentage 75%

($930,000/$1,235,000)

Less Net sales $0 $900,000

Estimated ending inventory at retail $335,000

($1,235,000-$900,000)

Estimated ending inventory at cost $251,250

($335,000 x 75%)

Therefore the December 31, 2021, inventory by applying the conventional retail method using the information provided will be:

Estimated ending inventory at retail $335,000

Estimated ending inventory at cost $251,250

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