Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

please answer Q2 Question 2 (Retail inventory method: 18 marks) Mercury Inc. is a grocery sales chain company. It uses Retail Inventory method to value

please answer Q2
image text in transcribed
image text in transcribed
Question 2 (Retail inventory method: 18 marks) Mercury Inc. is a grocery sales chain company. It uses Retail Inventory method to value its ending inventory. Presented below is information related to various inventory transactions during year 2021. Cost Inventory, Jan. 1. 2021 Purchases Transfer-in from affiliated companies Purchase returns 2,000 50,000 15.000 3,000 Retail $3,200 80,000 30,000 4,500 Additional information for the year Freight-in cost: 5800 Purchase discounts: $4,000 Total sales (actual sales amount recorded in the account, which is already reduced by employee discounts): $70,000 (that is, if not discounted for employees, total sales would have been $75,500) Sales returns: 58,000 Markups: $5,000 Markup cancellations: S1,000 Markdowns: $3,500 Markdown cancellations: S1,100 Employee discounts: $5,500 Normal shortages: $850 (cost), S1,500 (retail) Abnormal shortages: S6,000 (cost), S12,000 (retail) Required: 1) To approximate the LCNRV, should Mercury Inc. choose the conventional retail inventory method or the cost method? Explain the rationale and the underlying concept of LCNRV. (5 marks) 2) Using the template given below, compute the cost of ending inventory as of Dec. 31. 2021 based on Retail Inventory method using the "Conventional Method" (round up to the whole dollar for amounts, round up to 4 decimals (= 2 decimal %) for cost-to-retail ratio) (13 marks) $$$ $$$ XXX de 202 to roka Cost story Retail Beginning inventory 2,000 3,200 XXX $$$ $$$ XXX $$$ XXX $$$ $$$ $$$ XXX $$$ $$$ XXX $$$ $$$ XXX 000000 $$$ $$$ XXX $$$ $$$ Goods available for sale Deduct: XXX $$$ XXX doo $$$ XXX $$$ XXX $$$ XXX $$$ XXX $$$ Ending inventory at retail $$$ Cost-to-retail ratio 0.0000 Ending inventory at cost $$$ $$$ $$$

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Fundamentals Of Financial Accounting

Authors: Fred Phillips, Robert Libby, Patricia Libby

1st Edition

0072992573, 9780072992571

More Books

Students also viewed these Accounting questions

Question

b. Did you suppress any of your anger? Explain.

Answered: 1 week ago