Dixon Books uses the retail inventory method to estimate its monthly ending inventories. The following information is available for two of its departments at October 31, 2014.

At December 31, Dixon Books takes a physical inventory at retail. The actual retail values of the inventories in each department are Hardcovers $790,000 and Paperbacks $335,000.

Instructions
(a) Determine the estimated cost of the ending inventory for each department at October 31, 2014, using the retail inventory method.
(b) Compute the ending inventory at cost for each department at December 31, assuming the cost-to-retail ratios for the year are 65% for Hardcovers and 75% forPaperbacks.

Transcribed Image Text:

Hardcovers Paperbacks Cost Retail Cost Retail Beginning inventory S 420,000 700,000 Purchases Freight-in Purchase discounts Net sales 280,000 360,000 2,135,000 3,200,000 ,155,000 1,540,000 24,000 44,000 12,000 22,000 3,100,000 1,570,000