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: 55,000 Markup cancellations: $1,000 Markdowns: $3,500 Markdown cancellations: $1,100 . Employee discounts: 55,500 Normal shortages: $850 (cost), SI 500 (retail) Abnormal shortages: $6,000 (cost), S12,000 (retail) Required: 1) To approximate the LCNRV, should Mercury in choose the conventional retail inventory method or the cost method? Explain the rationale and the tunderlying 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) Cost 2,000 SSS SSS SSS SSS SSS SSS SSS SSS SSS Retail 3,200 SSS SSS SSS SSS SSS SSS SSS SSS SSS Beginning inventory XXX XXX XXX XXX XXX XXX XXX XXX Goods available for sale Deduct: XXX XXX XXX XXX XXX XXX Ending inventory at retail Cost-to-retail ratio Ending inventory at cost SSS SSS SSS SSS SSS SSS SSS 0.0000 SSS 7