The following information is available for the past month for a retail store: What is the ending inventory at cost using the basic retail method? (Round cost-to-retail ratios to four decimal places.)
A)$24,415
B)$21,500
C)$55,000
D)$23,216

Question

The following information is available for the past month for a retail store:  What is the ending inventory at cost using the basic retail method? (Round cost-to-retail ratios to four decimal places.)
A)$24,415 
B)$21,500 
C)$55,000 
D)$23,216

Quizplus · Accepted Answer

The basic retail method formula is: 
Ending Inventory at Cost = Net Purchases + Beginning Inventory at Cost – Sales at Retail
To calculate net purchases at cost, we need to multiply the net purchases at retail with cost-to-retail percentage. 
Net purchases at retail = $76,000
Cost-to-retail percentage = Cost ÷ Retail = $44,000 ÷ $76,000 = 0.5789
Net purchases at cost = $76,000 x 0.5789 = $44,000
Using the formula, 
Ending Inventory at Cost = $44,000 + $15,000 - $35,585 = $23,415
Therefore, the correct answer is A. $24,415.

The Following Information Is Available for the Past Month for a Retail