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1. Compute the ending inventory at cost as of January 31, 2018, using the retail method which approximates lower of cost or market.

2. Write a memo describing a) the results of your analysis, b) why companies may use the retail method, c) the treatment of fluctuating prices (markups and markdowns).

Congratulations! You are the new accountant for Diamond Company. You are getting ready to prepare the financial statements as of January 31, 2018, given the following information: At Cost At Reta Inventory, February 1, 2017 $81,000 108,700 35,000 Markdowns 63,000 Markups 20,000 Markdown cancellations Markup cancellations 10,000 Purchases 209,300 283.800 335,000 Sales revenue 4,300 5,500 Purchases returns and allowances Sales returns and allowances 10,000