Retail Inventory Method

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

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

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. Round the cost-to-retail ratio to three decimal places.

RED DEPARTMENT STORE

Computation of Estimated Inventory

Using Retail Inventory Method December 31, 2016

Cost Retail

_________________

_________________

_________________

_________________

_________________

_________________

_________________

Estimated inventory at retail at December 31, 2016		$
Estimated inventory at December 31, 2016, lower of cost or market	$