Chewy Candy has a beginning inventory of $1,000 with a retail value of $1,800.June purchases were $3,000,with a retail value of $4,700 and retail sales were $4,200.What is the June 30 estimated ending inventory at cost under the retail method?

Question

Quizplus · Accepted Answer

1. Find the cost-to-retail percentage: 
Beginning inventory cost / Beginning inventory retail = $1,000 / $1,800 = 0.556
Purchases cost / Purchases retail = $3,000 / $4,700 = 0.638
Weighted cost-to-retail percentage = (0.556 x $1,800 + 0.638 x $4,700) / ($1,800 + $4,700) = 0.614

2. Calculate the expected ending inventory at retail: 
Beginning inventory retail + Purchases retail - Sales retail = $1,800 + $4,700 - $4,200 = $2,300

3. Calculate the estimated ending inventory at cost: 
Expected ending inventory at retail x Cost-to-retail percentage = $2,300 x 0.614 = $1,409

4. Round to the nearest dollar: 
$1,409 is closest to $1,416, which is answer choice D.

Chewy Candy Has a Beginning Inventory of $1,000 with a Retail