A retail company has goods available for sale of $500,000 at retail and $200,000 at cost and ending inventory of $49,000 at retail.What is the estimated cost of goods sold?

Question

Quizplus · Accepted Answer

Cost of Goods Sold = Beginning Inventory at Cost + Purchases at Cost - Ending Inventory at Cost

First, we need to find the beginning inventory at cost. We can do this by using the retail inventory method:

Cost to Retail Ratio = Cost of Goods Available for Sale / Retail Goods Available for Sale

Cost to Retail Ratio = $200,000 / $500,000 = 0.4

Therefore, beginning inventory at cost = Beginning Inventory at Retail * Cost to Retail Ratio

Beginning Inventory at Cost = ($500,000 - $49,000) * 0.4 = $180,400

Next, we can calculate the estimated cost of goods sold:

Cost of Goods Sold = $180,400 + $200,000 - $49,000 = $331,400

Therefore, the best choice is C, $180,400.

A Retail Company Has Goods Available for Sale of $500,000