Henke Co. uses the retail inventory method to estimate its inventory for interim statement purposes. Data relating tothe computation of the inventory at July 31, 2020, are as follows:

CostRetail

Inventory, 2/1/20P200,000P250,000

Purchases1,000,0001,575,000

Markups, net175,000

Sales1,750,000

Estimated normal shoplifting losses20,000

Markdowns, net110,000

1. Under the lower-of-cost-or-net realizable value method, Henke's estimated inventory at July 31, 2020is

a.P72,000.

b. P84,000.

c. P96,000.

d.P120,000.

Problem7

Crane Sales Company uses the retail inventory method to value its merchandise inventory. The following information is available for the current year:

CostRetail

Beginning inventoryP30,000P50,000

Purchases145,000200,000

Freight-in2,500

Net markups8,500

Net markdowns10,000

Employee discounts1,000

Sales205,000

1. If the ending inventory is to be valued at the lower-of-cost-or-net realizable value, what is the cost to retail ratio?

a.P177,500 P250,000

b.P 177,500 P 258,500

c.P175,000 P260,000

d.P177,500 P248,500