Describe the Retail Inventory Method.

a) Present an overview of the process.

b) Describe mark ups, mark downs, mark down cancelations; and mark up cancellations in the context of the retail inventory method.

c) Describe the two alternative assumptions that firms can use to calculate the value of ending inventory using the retail method.

d) Using the following data, calculate the ending inventory with each of the two assumptions.

XYZ, Inc. Data Cost Beginning inventory $ 1,200 Puchases (net) 32,000 Merchandise available for sale 33,200 $ Retail 2,000 50,240 52,240 $ Add markups Less markup cancellations 2,700 (1,000) 1,700 53,940 $ 33,200 Deduct Markdowns Markdown cancellations (1,275) 900 (375) 53,565 Deduct sales (net) Ending inventory at retail (45,000) 8,565 $