Rods and Reels Ltd, a specialist retail business selling fishing supplies, performed a physical stocktake of inventory at retail price at the end of the current year. The manager calculated the total retail value of the ending inventory was $285 000. The following information is available for the year:

Management estimates its inventory loss from theft and other causes by comparing its physical ending inventory at retail prices with an estimated ending inventory at retail prices (determined by subtracting goods available for sale at selling prices from sales) and reducing this difference to cost by applying the proper cost ratio.
Required

(a) Calculate the estimated cost of the ending inventory using the retail inventory method. This is the inventory value that will be recorded in the Statement of Financial Position. The calculation should be based on the physical inventory taken at retail prices.

(b) Calculate the estimated inventory loss for the year from theft and other causes.

Transcribed Image Text:

Beginning inventory Net Purchases Sales Cost Selling Price $ 162 000 $ 240 000 729 000 1 110 000 1 056 000