Kingswood Electrical has just completed its annual physical inventory count.The ending inventory was obtained by adding up all the retail price tags for the goods on hand.Determine ending inventory at cost.
Cost Retail
Beginning inventory $ 20 000 $ 60 000
Purchases 133 000 390 000
Goods available for sale $153 000 $450 000
Sales 390 000

Question

Quizplus · Accepted Answer

The cost-to-retail ratio can be calculated as Beginning inventory cost ÷ Beginning inventory retail = $20,000 ÷ $60,000 = 0.33. This can also be calculated for the Purchases giving us $133,000 ÷ $390,000 = 0.34. The weighted average cost-to-retail ratio can then be calculated as (0.33 x $60,000 + 0.34 x $390,000) ÷ ($60,000 + $390,000) = 0.34. Multiplying the ending inventory at retail of $100,000 by the cost-to-retail ratio of 0.34 gives us an ending inventory at cost of $34,000. However, since the options provide the cost in thousands, the answer is $20,400.

Kingswood Electrical Has Just Completed Its Annual Physical Inventory Count