A retail company has goods available for sale of $500,000 at retail and $200,000 at cost and ending inventory of $57,000 at retail. What is the estimated cost of goods sold?

Question

Quizplus · Accepted Answer

To calculate the estimated cost of goods sold, we need to use the cost-to-retail ratio method.

Cost-to-retail ratio = Cost of goods available for sale / Goods available for sale at retail

= $200,000 / $500,000

= 0.4

Now, we can calculate the estimated cost of goods sold using the ending inventory at retail and the cost-to-retail ratio.

Estimated Cost of Goods Sold = (Goods Available for Sale at Cost - Ending Inventory at Cost) x Cost-to-Retail Ratio

= ($500,000 - $57,000) x 0.4

= $177,200

Therefore, the best choice is C.

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