Darla's Card Shop uses the average cost retail inventory method to determine the ending inventory. Darla's accounting records for 2014 contained the following information: $\begin{array}{c}
\begin{array}{l}
\underline{\text { Retail }} \
\$317,000 \
350,000\
78,500 \
12,000 \
8,000
\end{array}
\begin{array}{lll}
\underline{\text {Cost}}\
\$ 216,000 \
\
\
64,000\
\
\end{array}
\begin{array}{lll}
\
\text {Purchases}\
\text {Sales}\
\text {Begining inventory}\
\text {Net markups}\
\text {Net markdowns}
\end{array}
\end{array}$

In addition, sales returns for 2014 were $28,000, and employee discounts taken were $6,000. What is the cost of the ending inventory at December 31, 2014?

Question

Darla's Card Shop uses the average cost retail inventory method to determine the ending inventory. Darla's accounting records for 2014 contained the following information: $\begin{array}{c}
\begin{array}{l}
\underline{\text { Retail }} \
\$317,000 \
350,000\
78,500 \
12,000 \
8,000
\end{array}
\begin{array}{lll}
\underline{\text {Cost}}\
 \$ 216,000 \
\
\
64,000\
\
\end{array}
\begin{array}{lll}
\
\text {Purchases}\
\text {Sales}\
\text {Begining inventory}\
\text {Net markups}\
\text {Net markdowns} 
\end{array} 
\end{array}$

In addition, sales returns for 2014 were $28,000, and employee discounts taken were $6,000. What is the cost of the ending inventory at December 31, 2014?

Quizplus · Accepted Answer

To find the cost of ending inventory using the average cost retail inventory method, first calculate the cost-to-retail ratio: (Beginning Inventory Cost + Purchases Cost) / (Beginning Inventory Retail + Purchases Retail + Net Markups - Net Markdowns). Then, calculate the ending inventory at retail: (Beginning Inventory Retail + Purchases Retail + Net Markups - Net Markdowns - Sales - Sales Returns - Employee Discounts). Finally, multiply the ending inventory at retail by the cost-to-retail ratio to get the cost of ending inventory.

Darla's Card Shop Uses the Average Cost Retail Inventory Method