Retail Inventory Method

Harmes Company is a clothing store that uses the retail inventory method. The following information relates to its operations during the year:

	Cost	Retail
Inventory, January 1	$32,500	$65,000
Purchases	130,000	231,143
Markups (net)		2,000
Markdowns (net)		1,000
Sales		180,000

Required:

1. Compute the ending inventory by the retail inventory method for the following cost flow assumption: FIFO. Round the cost-to-retail ratio to three decimal places.

HARMES COMPANY
Calculation of ending inventory by retail inventory method
FIFO
		Cost	Retail
Purchases		130,000	231,143
Add: Markups (net)			2,000
Less: Markdowns (net)			-1,000
		130,000	232,143
Cost-to-retail ratio:	.560
Beginning inventory		32,500	65,000
Goods available for sale		162,500	297,143
Less: Sales			-180,000
Ending inventory			117,143

2. Compute the ending inventory by the retail inventory method for the following cost flow assumption: Average cost. Round the cost-to-retail ratio to three decimal places.

HARMES COMPANY
Calculation of ending inventory by retail inventory method
Average Cost
		Cost	Retail
Beginning inventory		_________	_________
Purchases		_________	_________
Add: Markups (net)		_________	_________
Less: Markdowns (net)		_________	_________
Goods available for sale		_________	_________
Cost-to-retail ratio	_________
Less: Sales		_________	_________
Ending inventory		_________	_________

3. Compute the ending inventory by the retail inventory method for the following cost flow assumption: LIFO. Round the cost-to-retail ratio to three decimal places.

HARMES COMPANY
Calculation of ending inventory by retail inventory method
LIFO
		Cost	Retail
		_________	_________
Cost-to-retail ratio	_________
		_________	_________
		_________	_________
		_________	_________
		_________	_________
Cost-to-retail ratio	_________
		_________	_________
		_________	_________

4. Compute the ending inventory by the retail inventory method for the following cost flow assumption: Lower of cost or market (based on average cost). Round the cost-to-retail ratio to three decimal places.

HARMES COMPANY
Calculation of ending inventory by retail inventory method
Lower of Cost or Market (based on average cost)
		Cost	Retail
		_________	_________
		_________	_________
		_________	_________
		_________	_________
Cost-to-retail ratio	_________
		_________	_________
		_________	_________
		_________	_________
		_________	_________