A company reported the following information regarding its inventory: Beginning inventory: cost of $63,000; retail of $140,000
Net purchases: cost $42,000; retail $84,000 Sales at retail: $160,000
The year-end inventory showed $64,000 worth of merchandise available at retail prices. What is the cost of the ending inventory?

Question

Quizplus · Accepted Answer

To find the cost of the ending inventory, we need to use the retail inventory method.

Beginning Inventory at retail prices = $140,000 
Net Purchases at retail prices = $84,000 
Goods available for sale at retail prices = $224,000 ($140,000 + $84,000)

We know that the ending inventory at retail prices is $64,000.

Using the formula: Cost-to-Retail Percentage = Cost of Goods ÷ Retail of Goods, we can find the cost of the ending inventory. 
Cost-to-Retail Percentage = ($63,000 + $42,000) ÷ ($140,000 + $84,000) = 0.5

Cost of Ending Inventory at retail = $64,000 
Cost of Ending Inventory = $64,000 x 0.5 = $32,000

Therefore, the cost of the ending inventory is $32,000. The best choice is C.

A Company Reported the Following Information Regarding Its Inventory: Beginning