Red Department Store uses the retail inventory method. Information relating to the computation of the inventory at December 31, 2016, is as follows:

Estimated normal shrinkage is 2% of sales.

Required:

Prepare a schedule to calculate the estimated ending inventory at the lower of average cost or market at December 31, 2016, using the retail inventory method. Show supporting computations in good form. Round the cost-to-retail ratio to 3 decimal places.

Cost $ 32,000 Retail $ 80,000 Markups 600,000 590,000 Cost Retail Inventory at January 1, 2016 Sales Purchases Freightin Markup cancellations Markdowns Markdown cancellations $60,000 10,000 25,000 5,000 270,000 7,600