Northern Industries had sales of $428,000 in the month of May. Use the retail method to estimate the value of the inventory as of May 31 given the following financial information: (Round cost ratio to four decimal places) $\begin{array}{llcc}
\text { Northern Industries } & \
\text {Financial Highlights } &\
\text {May 1-May 31 } &\
\end{array}$
$\begin{array}{|lll|}
\hline & \text { Cost } & \text { Retail } \
\hline \text { Beginning Inventory } & \$ 434,719& \$585,100\
\text { Net Purchases (January) } & 148,9211 & 170,900 \
\text { Total avalable for sale } & & \
\hline
\end{array}$

Question

Northern Industries had sales of $428,000 in the month of May. Use the retail method to estimate the value of the inventory as of May 31 given the following financial information: (Round cost ratio to four decimal places) $\begin{array}{llcc}
  \text { Northern Industries } &  \ 
 \text {Financial Highlights  } &\
 \text {May 1-May 31 } &\ 
\end{array}$
$\begin{array}{|lll|} 
\hline  & \text { Cost } & \text { Retail } \
\hline \text { Beginning Inventory } & \$ 434,719& \$585,100\
\text { Net Purchases (January) } & 148,9211 & 170,900 \
\text { Total avalable for sale } & & \
\hline
\end{array}$

Quizplus · Accepted Answer

To estimate the ending inventory using the retail method, first calculate the cost-to-retail ratio: (Cost of Beginning Inventory + Cost of Purchases) / (Retail of Beginning Inventory + Retail of Purchases) = (434,719 + 148,921) / (585,100 + 170,900) = 583,640 / 756,000 = 0.7714. Then, calculate the retail value of goods available for sale: 585,100 + 170,900 = 756,000. Subtract sales from this total to find the ending inventory at retail: 756,000 - 428,000 = 328,000. Finally, apply the cost-to-retail ratio to estimate the ending inventory at cost: 328,000 * 0.7714 = 253,216.

Northern Industries Had Sales of $428,000 in the Month of May