Clooney Department Store estimates inventory by using the retail inventory method. The following information was developed: $\begin{array}{lrr}&\text { At Cost }&\text { At Retail }\
\text { Beginning inventory } & \$ 360,000 & \$ 750,000 \
\text { Goods purchased } & 900,000 & 1,350,000 \
\text { Net sales } & & 1,400,000
\end{array}$ The estimated cost of the ending inventory is
A) $280,000.
B) $336,000.
C) $420,000.
D) $466,667.

Question

Quizplus · Accepted Answer

The cost-to-retail ratio is calculated as $(360,000 + 900,000) / (750,000 + 1,350,000) = 0.6$. The ending inventory at retail is $750,000 + 1,350,000 - 1,400,000 = 700,000$. The estimated cost of the ending inventory is $700,000 \times 0.6 = 420,000$.

Clooney Department Store Estimates Inventory by Using the Retail Inventory