Farooqui 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, 2012.

At December 31, Farooqui 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, 2012, 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.

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