(L05) (Retail Inventory Method) Presented below is information related to Bobby Engram Company.

Cost Retail Beginning inventory $ 58,000 $100,000 Purchases (net) 122,000 200,000 Net markups 10,345 Net markdowns 26,135 Sales revenue 186,000 Instructions

(a) Compute the ending inventory at retail.

(b) Compute a cost-to-retail percentage (round to two decimals) under the following conditions.

(1) Excluding both markups and markdowns.

(2) Excluding markups but including markdowns.

(3) Excluding markdowns but including markups.

(4) Including both markdowns and markups.

(c) Which of the methods in

(b) above (1, 2, 3, or 4) does the following?

(1) Provides the most conservative estimate of ending inventory.

(2) Provides an approximation of lower-of-cost-or-market.

(3) Is used in the conventional retail method.

(d) Compute ending inventory at lower-of-cost-or-market (round to nearest dollar).

(e) Compute cost of goods sold based on (d).

(f) Compute gross margin based on (d).