Fashion Barn's total cost valuation of inventory is $120,000 and its total retail valuation is $300,000.The adjusted retail book inventory figure has been determined to be $250,000.Using the retail method of inventory valuation,what would be Fashion Barn's approximate closing inventory figure at cost?

Question

Quizplus · Accepted Answer

To calculate the closing inventory at cost using the retail method, first, we need to determine the cost-to-retail ratio.

Cost-to-Retail Ratio = Total Cost Valuation of Inventory / Total Retail Valuation of Inventory 
Cost-to-Retail Ratio = $120,000 / $300,000 
Cost-to-Retail Ratio = 0.4

Then, we can use the adjusted retail book inventory figure to determine the closing inventory at cost.

Closing Inventory at Cost = Adjusted Retail Book Inventory x Cost-to-Retail Ratio 
Closing Inventory at Cost = $250,000 x 0.4 
Closing Inventory at Cost = $100,000

Therefore, the approximate closing inventory figure at cost for Fashion Barn would be $100,000, which corresponds to choice (C).

Fashion Barn's Total Cost Valuation of Inventory Is $120,000 and Its