Question

1.Given the following October 2017 data for the Paquette Company:



Using the Retail method, the inventory cost estimate at 10/31/17 is:

At Cost $1,000 Beginning Inventory Mark ups Mark-up Cancellations Net Sales Net Purchases At Retail $1,250 $250 $150 $5,000 $6,650 $5,000

Select one:

a. $2,900

b. $2,354

c. $2,278

d. $2,250

e. $3,000

2.Given the following March 2016 data for the Werthmann Company:



The estimated inventory at 3/31/16 is:

Select one:

a. $500

b. $1,200

c. $720

d. $800

e. $320

Answer 1

	Correct option is: D. $2,250
	Workings:
		Cost	Retail	Cost - to Retail Ratio
	Beginning Inventory	$         1,000	$         1,250
	Purchases	$         5,000	$         6,650
	Net Markups		$             250
		$         6,000	$         8,150
	Net Markdowns		$           -150
	Goods available for sale	$         6,000	$         8,000
	Cost - to Retail Percentage			75.00%
	Net Sales		$        -5,000
	Estimated Ending Inventory at retail		$         3,000
	Estimated Ending Inventory at cost ($3000 X 75%)	$         2,250
	Correct option is: C. $720
	Workings:
	Beginning Inventory	=	$         1,100
Add:	Purchases	=	$             900
	Cost of goods available	=	$         2,000
Less:	Cost of goods sold	=	$        -1,280
	Ending Inventory	=	$             720
	Workings:
	Cost of goods sold	=	Sales / (1 + profit margin)
		=	$1600/1.25
		=	$         1,280