Data summarizing the inventory activity during 2013 for a merchandising company are (000's): $\begin{array} { | l | l | l | }
\hline & \text { Cost } & \text { Retail } \
\hline \text { Beginning inventory } & \$ 110 & \$ 216 \
\hline \text { Net purchases } & 618 & 880 \
\hline \text { Net mark-ups } & 24 & \
\hline \text { Net markdowns } & ( 80 ) & \
\hline \text { Goods available for sale } & \$ 728 & \$ 1,040 \
\hline \text { Net sales } & ( 880 ) & \
\hline \text { Ending inventory at retail } \$ 160 & \
\hline
\end{array}$
The company uses the retail method of valuing inventory, at average, lower-of-cost-or-market. The 2013 inventory valuation is:
A) $99
B) $104
C) $112
D) $160

Question

Data summarizing the inventory activity during 2013 for a merchandising company are (000's): $\begin{array} { | l | l | l | } 
\hline & \text { Cost } & \text { Retail } \
\hline \text { Beginning inventory } & \$ 110 & \$ 216 \
\hline \text { Net purchases } & 618 & 880 \
\hline \text { Net mark-ups } & 24 & \
\hline \text { Net markdowns } & ( 80 ) & \
\hline \text { Goods available for sale } & \$ 728 & \$ 1,040 \
\hline \text { Net sales } & ( 880 ) & \
\hline \text { Ending inventory at retail } \$ 160 & \
\hline
\end{array}$
 The company uses the retail method of valuing inventory, at average, lower-of-cost-or-market. The 2013 inventory valuation is:
A) $99
B) $104
C) $112
D) $160

Quizplus · Accepted Answer

The cost-to-retail percentage is calculated as $728 / $1,040 = 70%. The ending inventory at retail is $160, so the ending inventory at cost is $160 * 70% = $112. However, since the company uses the lower-of-cost-or-market method, the inventory is valued at the lower of cost ($112) or market ($104), which is $104.

Data Summarizing the Inventory Activity During 2013 for a Merchandising