On January 1, 2016, Pet Friendly Stores adopted the retail inventory method. Inventory transactions at both cost and retail, and cost indexes for 2016 and 2017 are as follows: 2016 2017 Cost Retail Cost Retail Beginning inventory $ 90,000 $ 150,000 Purchases 478,000 730,000 $ 511,000 $ 760,000 Purchase returns 2,500 3,500 2,200 4,000 Freight-in 6,960 8,000 Net markups 8,500 10,000 Net markdowns 4,000 6,000 Net sales to customers 650,000 680,000 Sales to employees (net of 30% discount) 14,000 17,500 Normal spoilage 5,000 6,600 Price Index: January 1, 2016 1.00 December 31, 2016 1.03 December 31, 2017 1.06