Question

Please provide detailed steps to arrive at answers. Also, this is due in a few hours, so please try to help quickly. Thank you very much.

1. Sparrow Company uses the retail inventory method to estimate ending inventory and cost of goods sold. Data for 2021 are as follows:

	Cost			Retail
Beginning inventory	$	91,000		$	181,000
Purchases		356,000			581,000
Freight-in		9,100
Purchase returns		7,100			11,100
Net markups					16,100
Net markdowns					12,100
Normal spoilage					3,100
Abnormal spoilage		4,654			8,100
Sales					541,000
Sales returns					10,100

The company records sales net of employee discounts. Employee discounts for 2021 totaled $4,100.

Required: Estimate Sparrow’s ending inventory and cost of goods sold for the year using the retail inventory method and the average cost application. (Round Cost-to-retail percentage to 2 decimal places and final answers to the nearest whole dollar amount.)

a. Est. Ending Inventory at Retail __________?

b. Est. Ending Inventory at Cost __________?

c. Est. Cost of Goods Sold __________?

[The following information applies to the questions displayed below.]

2. Raleigh Department Store uses the conventional retail method for the year ended December 31, 2019. Available information follows:

1. The inventory at January 1, 2019, had a retail value of $55,000 and a cost of $45,900 based on the conventional retail method.
2. Transactions during 2019 were as follows:

	Cost			Retail
Gross purchases	$	390,900		$	590,000
Purchase returns		6,900			20,000
Purchase discounts		6,000
Gross sales					570,000
Sales returns					8,000
Employee discounts					4,000
Freight-in		31,500
Net markups					35,000
Net markdowns					20,000

Sales to employees are recorded net of discounts.

3. The retail value of the December 31, 2020, inventory was $83,740, the cost-to-retail percentage for 2020 under the LIFO retail method was 81%, and the appropriate price index was 106% of the January 1, 2020, price level.
4. The retail value of the December 31, 2021, inventory was $55,590, the cost-to-retail percentage for 2021 under the LIFO retail method was 80%, and the appropriate price index was 109% of the January 1, 2020, price level.

Required:
1. Assume Raleigh Department Store adopts the dollar-value LIFO retail method on January 1, 2020. Estimating ending inventory for 2020 and 2021.

a. Total Ending Inventory at Dollar-Value LIFO Retail Cost, 2020

b. Total Ending Inventory at Dollar-Value LIFO Retail Cost, 2021

Answer 1

Question No. - (1) - Answer -

Step - (1) - Information Given -

Sparrow Company uses the retail inventory method to estimate ending inventory and cost of goods sold. Data for 2021 are as follows:

	Cost ($)	Retail ($)
Beginning inventory	91000	181000
Purchases	356000	581000
Freight-in	9100	-
Purchase returns	7100	11100
Net markups	-	16100
Net markdowns	-	12100
Normal spoilage	-	3100
Abnormal spoilage	4654	8100
Sales	-	541000
Sales returns	-	10100

The company records sales net of employee discounts. Employee discounts for 2021 totaled $4100.

.

Step - (2) -

Calculation of Sparrow’s Ending Inventory and Cost of goods sold for the year using the retail inventory method and the average cost application -

	Calculations / Remarks	Cost ($)	Retail ($)
Beginning inventory	Given in question	91000	181000
Add - Purchases	Given in question	356000	581000
Add - Freight-in	Given in question	9100	-
Less - Purchase returns	Given in question	(7100)	(11100)
Add - Net markups	Given in question	-	16100
Less - Net markdowns	Given in question	-	(12100)
Less - Abnormal spoilage	Given in question	(4654)	(8100)
Goods available for sale	-	444346	746800
Cost-to-retail percentage	[($444346 / $746800)*100] = 59.5%	-	-
Less - Normal spoilage	Given in question	-	(3100)
Less - Net Sales	[ $541000 - $10100 ]	-	(530900)
Less - Employee discounts	Given in question	-	(4100)
(a.) - Estimated ending inventory at Retail	[ $746800 - $3100 - $530900 - $4100 ]	-	208700
(b.) - Estimated ending inventory at Cost	[ $208700 * 59.5% ]	124177	-
(c.) - Estimated cost of goods sold	[ $444346 - $124177 ]	320169	-