Question

Kiddie World uses a periodic inventory system and the retail inventory method to estimate ending inventory and cost of goods sold. The following data are available for the quarter ending September 30, 2018:

	Cost			Retail
Beginning inventory	$	420,000		$	555,000
Net purchases		915,000			1,330,000
Freight-in		24,650
Net markups					60,000
Net markdowns					30,000
Net sales					1,260,000

Estimate ending inventory and cost of goods sold (LIFO).

	Cost	Retail	Cost to Retail Ratio
Beginning inventory	420,000	555,000
Plus: Net Purchases	915,000	1,330,000
Freight-in	24,650
Net mark-ups		60,000
Less: Net markdowns		(30,000)
Goods available for sale ( excluding beginning inventory)	939,650	1,360,000
Goods available for sale ( including beg inventory)	1,359,650	1,915,000
Cost-to-Retail percentage			69.09%
Less: Net Sales		(1,260,000)
Estimated ending inventory at retail		655,000?
Estimated ending inventory at cost	???????
Estimated cost of goods sold	???????

Answer 1

Answer
	Cost	Retail	Cost-to-Retail Ratio
Beginning Inventory	$420,000	$555,000
Plus: Net Purchases	$915,000	$1,330,000
Freight-n	$24,650
Net markups		$60,000
Less: Net markdowns		-$30,000
Goods available for sale	$1,359,650	$1,915,000
Cost-to-retail percentage			71%
Less: Net Sales		$1,260,000
Estimated ending inventory at retail		$655,000
Estimated ending inventory at cost	$465,050*
Estimated cost of goods sold	$894,600
*$655,000 x 71% = $465050