Compute the cost of ending inventory using the retail method when goods available for sale at cost are $10,000, retail is $27,000, and sales at retail equal $23,000. What will the cost ratio be? What will the cost of ending inventory be?

Question

Quizplus · Accepted Answer

The cost ratio is calculated as the cost of goods available for sale divided by the retail value of goods available for sale, which is $10,000 / $27,000 = 37%. The ending inventory at retail is the beginning inventory at retail minus sales, which is $27,000 - $23,000 = $4,000. The cost of ending inventory is then the ending inventory at retail times the cost ratio, which is $4,000 * 37% = $1,480.

Compute the Cost of Ending Inventory Using the Retail Method