Exercise 9-20

Presented below is information related to Pronghorn Company.

Cost Retail

Beginning inventory $ 56,950 $94,100

Purchases (net) 121,490 191,500

Net markups 10,935

Net markdowns 26,431

Sales revenue 186,270

a)Compute the ending inventory at retail.

Ending inventory

$

b)Compute a cost-to-retail percentage under the following conditions. (Round ratios to 2 decimal places, e.g. 78.74%)

Cost-to-retail percentage

(1)Excluding both markups and markdowns. %__________

(2)Excluding markups but including markdowns. %__________

(3)Excluding markdowns but including markups. %__________

(4)Including both markdowns and markups. %__________

c)Which of the methods in (b) above does the following?

(1)Provides the most conservative estimate of ending inventory.

(2)Provides an approximation of lower-of-cost-or-market.

(3)Is used in the conventional retail method.

d)Compute ending inventory at lower-of-cost-or-market. (Round ratio to 2 decimal places, e.g. 78.74% and final answer to 0 decimal places, e.g. 6,225.)

Ending inventory $_______

e)Compute cost of goods sold based on (d). (Round answer to 0 decimal places, e.g. 6,225.)

Cost of goods sold $_______

f)Compute gross margin based on (d). (Round answer to 0 decimal places, e.g. 6,225.)

Gross margin $______