Question 22 (2 points) Henke Co. uses the retail inventory method to estimate its inventory for interim statement purposes. Data relating to the computation of the inventory at July 31, 2014 are as follows: Cost Retail Inventory, 2/1/14 $200,000 $250,000 Purchases 1,000,000 1,575,000 Markups, net 175,000 Sales 1,600,000 Estimated normal shoplifting losses 20,000 Markdowns, net 110,000 Under the lower-of-cost-or-market method, Henke's estimated inventory at July 31, 2014 is: $162,000. $174,000. $186,000. $270,000. When calculating the cost ratio for the retail inventory method: if it is the conventional method, the beginning inventory is excluded and markdowns are not deducted. if it is the conventional method, the beginning inventory is included and markdowns are deducted. if it is the LIFO method, the beginning inventory is excluded and markdowns are deducted. if it is the LIFO method, the beginning inventory is included and markdowns are not deducted. Question 24 (2 points) Crane Sales Company uses the retail inventory method to value its merchandise inventory. The following information is available for the current year: Cost Retail Beginning inventory $30,000 $45,000 Purchases 175,000 240,000 Freight-in 2,500 Net markups 8,500 Net markdowns 10,000 Employee discounts 1,000 Sales revenue 205,000 If the ending inventory is to be valued at the lower-of-cost-or-market, what is the cost-to-retail ratio? $205,000 = $295,000 $207,500 - $283,500 $207,500 = $285,000 $207,500 = $293,500 Question 25 (2 points) What is the effect of net markups on the cost-retail ratio when using the conventional retail method? Decreases the cost-to-retail ratio. Depends on the amount of the net markdowns. Increases the cost-to-retail ratio. No effect on the cost-to-retail ratio