Question

Harmes Company is a clothing store that uses the retail inventory method. The following information relates to its operations during 2016: Cost Retail Inventory, January 1 $28,100 $41,400 Purchases 67,700 101,600 Markups (net) — 2,000 Markdowns (net) — 400 Sales — 86,600 Required: 1. Compute the ending inventory by the retail inventory method for the following cost flow assumption: FIFO. Round the cost-to-retail ratio to three decimal places. If necessary, round dollar amounts to the nearest whole dollar.

1. Compute the ending inventory by the retail inventory method for the following cost flow assumption: FIFO. Round the cost-to-retail ratio to three decimal places. If necessary, round dollar amounts to the nearest whole dollar.

HARMES COMPANY
Calculation of ending inventory by retail inventory method
FIFO 2016
	Cost	Retail
Purchases	$	$
Add: Markups (net)
Less: Markdowns (net)
	$	$
Add: Beginning inventory
	$	$
		$
	$

Answer 1

Solution:

HARMES COMPANY
Calculation of ending Inventory by retail inventory method
FIFO 2016
	Cost	Retail
Purchases	$67,700	$101,600
Markups (net)		$2,000
Markdowns (net)		$(400)
	$67,700	$103,200
Add: Beginning inventory	$28,100	$41,400
Goods available for sale	$95,800	$144,600
Less: Sales		$(86,600)
Ending Inventory at retail		$58,000
Ending inventory at cost (58000*0.656)		$38,048

Working:
cost to retail ratio = 67700/103200 = 0.656