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Escriba Corp. uses the conventional retail method to estimate ending inventories. Here is the data from Escribas records for the year ended December 31, 2020:

Escriba Corp. uses the conventional retail method to estimate ending inventories. Here is the data from Escribas records for the year ended December 31, 2020:

Cost

Retail

Inventory, January 1

$ 88,000

$ 132,000

Purchases

163,000

240,000

Net markups

10,100

Net markdowns

9,200

Normal spoilage

43,200

Net sales

213,000

4a. Estimate the cost of ending inventory applying the conventional retail method.

4b. What if the physical count of ending inventory at retail totaled to $101,500 of goods on hand? Your boss asks you to explain what could have happened and how you would proceed to develop a dollar amount for ending inventory in the financial statements.

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