Hooked on Books uses the retail inventory method to estimate its monthly ending using retail method. inventories. The following information is available for two of its departments at October

(LO 8) 31, 2014.

Hardcovers Paperbacks Cost Retail Cost Retail Beginning inventory $ 420,000 $ 700,000 $ 280,000 $ 360,000 Purchases 2,094,000 3,200,000 1,155,000 1,540,000 Freight-in 26,000 12,000 Purchase discounts 44,000 22,000 Net sales 3,100,000 1,570,000 At December 31, Hooked on 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 77% for Paperbacks.