Question
Wentforth Inc. is a prominent retailer and uses the retail inventory method to estimate the value of its ending inventory.Records are kept at cost and
Wentforth Inc. is a prominent retailer and uses the retail inventory method to estimate the value of its ending inventory.Records are kept at cost and retail, or retail only, as follows:
Cost Retail
Inventory, 12/31/17 $250,000 $390,000
Purchases 914,500 1,460,000
Purchase returns 60,000 80,000
Purchase discounts 18,000
Gross sales revenue (after employee discounts) 1,410,000
Sales returns 97,500
Markups 120,000
Markup cancellations 40,000
Markdowns 45,000
Markdown cancellations 20,000
Freight-in 42,000
Employee discounts granted 8,000
Loss from breakage (normal) 4,500
a. Assuming that Wentforth Inc. uses the conventional retail inventory method, compute the cost of its ending inventory at December 31, 2018.
b. How would this estimate differ if Wentforth used the historical retail inventory method?
c. Which method should Wentforth use?
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