Retail Inventory Method

The following information relates to the retail inventory method used by Jeffress Company:

	Cost		Retail
Beginning inventory	$11,160		$18,000
Purchases	54,600		92,400
Freight-in	840
Net additional markups			600
Net markdowns			1,144
Sales			94,056

Required:

1 (a). Compute the ending inventory by the retail inventory method, using the following cost flow assumption: FIFO. Round the cost-to-retail ratio to three decimal places. If necessary, round dollar amounts to the nearest whole dollar.

JEFFRESS COMPANY
Calculation of ending inventory by retail inventory method
FIFO
	Cost	Retail
Purchases	$	$
Less: Markups (net)
Add: Markdowns (net)
Less: Freight-In
	$	$
Ending inventory at cost
Goods available for sale	$	$
Less: Sales
Ending inventory at retail		$
Ending inventory at cost	$

1 (b). Compute the ending inventory by the retail inventory method, using the following cost flow assumption: Average cost. Round the cost-to-retail ratio to three decimal places. If necessary, round dollar amounts to the nearest whole dollar.

JEFFRESS COMPANY
Calculation of ending inventory by retail inventory method
Average Cost
	Cost	Retail
Beginning inventory	$	$
Less: Markups (net)
Add: Markdowns (net)
Less: Freight-In
Beginning inventory
Goods available for sale	$	$
Less: Sales
Ending inventory at retail		$
Ending inventory at retail	$

1 (c). Compute the ending inventory by the retail inventory method, using the following cost flow assumption: LIFO. Round the cost-to-retail ratio to three decimal places. If necessary, round dollar amounts to the nearest whole dollar.

JEFFRESS COMPANY
Calculation of ending inventory by retail inventory method
LIFO
	Cost	Retail
Cash	$	$
Add: Markdowns (net)	$	$
Add: Markdowns (net)
Less: Freight-In
Beginning inventory
	$	$
Goods available for sale	$	$
Less: Sales
Ending inventory at LIFO cost		$
Ending inventory at retail	$

1 (d). Compute the ending inventory by the retail inventory method, using the following cost flow assumption: Lower of cost or market (based on average cost). Round the cost-to-retail ratio to three decimal places. If necessary, round dollar amounts to the nearest whole dollar.

JEFFRESS COMPANY
Calculation of ending inventory by retail inventory method
Lower of Cost or Market (based on average cost)
	Cost	Retail
Cash	$	$
Add: Markups (net)
Add: Markdowns (net)
Less: Freight-In
	$	$
Beginning inventory
Goods available for sale
Less: Sales		$
Ending inventory at retail	$

2. Which of the following assumption(s) is/are necessary for the retail inventory method to produce accurate estimates of ending inventory?

All of the items in inventory have the same markup.

The cost-to-retail ratio must remain constant over the accounting period.