Retail Method; Gross Profit Method

Selected data on inventory, purchases, and sales for Celebrity Tan Co. and Ranchworks Co. are as follows:

		Cost		Retail
Celebrity Tan Co.
Inventory, August 1		$397,000		$584,000
Transactions during August
	Purchases (net)	4,567,000		6,716,000
	Sales			6,909,000
Ranchworks Co.
Inventory, March 1		$250,000
Transactions during March through November:
	Purchases (net)	3,315,000
	Sales	5,181,000
Estimated gross profit rate		35%

WORD KEY

• Merchandise available for sale
• Inventory, August 31, at estimated cost
• Inventory, August 1
• Inventory, August 31, at retail
• Sales returns and allowances
• Sales for August
• Purchases in August (net)

Word Key

• Estimated cost of goods sold
• Estimated inventory, November 30
• Merchandise available for sale
• Inventory, March 1
• Sales returns and allowances
• Sales for March-November
• Estimated cost of goods sold
• Estimated gross profit
• Purchases in March-November (net)
• Sales for March-November

2b. Assume that Ranchworks Co. took a physical inventory on November 30 and discovered that $191,350 of inventory was on hand. What was the estimated loss of inventory due to theft or damage during March through November?

1. Determine the estimated cost of the inventory of Celebrity Tan Co. on August 31 by the retail method, presenting details of the computations. Celebrity Tan Co. Estimated Cost of Inventory August 31 Retail Cost Ratio of cost to retail price: 2a. Estimate the cost of the inventory of Ranchworks Co. on November 30 by the gross profit method, presenting details of the computations. Ranchworks Co. Estimated Cost of Inventory November 30 Cost