Question
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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