Patel Packing had the following information for its inventory: Beginning inventory: cost $107,000; retail $130,000 Net purchases: cost $58,000; retail $120,000Sales at retail: $145,000What is the estimated cost of the ending inventory?

Question

Patel Packing had the following information for its inventory: Beginning inventory: cost $107,000; retail $130,000  Net purchases: cost $58,000; retail $120,000Sales at retail: $145,000What is the estimated cost of the ending inventory?

Quizplus · Accepted Answer

First, we need to calculate the ending inventory at retail:
Beginning inventory at retail: $130,000
Net purchases at retail: $120,000
Total goods available for sale at retail: $250,000
Sales at retail: $145,000
Ending inventory at retail: $105,000 ($250,000 - $145,000)

Next, we need to use the cost-to-retail percentage to estimate the cost of the ending inventory. The cost-to-retail percentage is calculated by dividing the cost of goods by the retail value.

Beginning inventory at cost: $107,000
Net purchases at cost: $58,000
Total goods available for sale at cost: $165,000 ($107,000 + $58,000)

Cost-to-retail percentage: $165,000 / $250,000 = 0.66

Estimated cost of the ending inventory: 0.66 x $105,000 = $69,300

Therefore, the best choice is D.

Patel Packing Had the Following Information for Its Inventory: Beginning