A company uses the retail method to estimate inventory for interim reporting purposes. Which of the following describes the proper treatment of beginning inventory, net markups and net markdowns in the cost-to-retail ratio calculation if the conventional retail method is used.

Multiple Choice

• Beginning inventory and net markdowns should be included, but net markups should be excluded.

• Beginning inventory and net markups should be included, but net markdowns should be excluded.

• Net markups and Net Markdowns should be included, but Beginning Inventory should be excluded.

• Net markups should be included, but Beginning Inventory and net markdowns should be excluded.

I would pick 1