Homework Answers
Solution:
| Particulars | At Cost | At Retail |
| April 1, Beginning Inventory | 75360 | 97968 |
| Purchases | 112480 | 146224 |
| Purchase returns and allowances | 4120 | 5356 |
| Freight In | 2580 | 0 |
| Sales | 141600 | 141600 |
| Sales return and allowances | 1260 | 1260 |
| Employees Discount | 1000 | 1000 |
| Normal Shortage | 640 | 640 |
| April 30, Physical Inventory at retail | 66600 |
1) As per retail-Shortage
Total Sales during the period = Sales - Sales returns & allowances-Employee Discount
=141600-1260-1000 = 139340
Retails Goods Available for sale = Opening Inventory +Purchases -Purchase return-Normal Shortage
= 97968+146224-5356-6400= 238196
Closing Inventory = Goods Available for sale - Sales during the period
= 238196-139340= 98856
However, closing inventory as per retail = 66600
Shortage/Loss as per retail = 98856-66600= 32256
2) As per Cost
Beginning Inventory as per cost = 75360
Beginning Inventory as per retail = 97968
Purchases as per cost = Purchase - Purchase returns = 112480-4120=108360
Purchases as per retail = Purchase - Purchase returns = 146224-5356=140868
Cost to Retail Ratio = Cost of beginning inventory+ Cost of purchase inventory/ Retail value of beginning inventory +Retail value of goods purchase during the year
Cost to Retail Ratio = 75360+108360/97968+140868 = 76.92%
Closing Inventory at cost = Retail Closing inventory(Given)* Cost to Retail Ratio
97968*76.92%=75360
Closing Inventory = Opening+ Purchase - Purchase Return +Freight in - Sales +Sales return - Employees discount - Normal Shortage
= 75360+112480-4120+2580-(141600*76.92%)+(1260*76.92%)-1000-640= 76706
Shortage/Loss as per cost method = 76706-75360= 1346
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