Barker's Book Store uses the retail inventory method to estimate its monthly ending inventories. The following information is available for two of its departments at October 31, 1998.

At December 31, Barker's Book Store takes a physical inventory at retail. The actual retail values of the inventories in each department are: Hardcovers \(\$ 400,000\) and Paperbacks \(\$ 100,000\)
\section*{Instructions}

(a) Determine the estimated cost of the ending inventory for each department at October 31, 1998, using the retail inventory method.

(b) Compute the ending inventory at cost for each department at December 31, assuming the cost to retail ratios for the year are \(65 \%\) for hardcovers and \(70 \%\) for paperbacks.

During July the company had the following purchases and sales:

Instructions

(a) Determine the inventory under a perpetual inventory system using (1) FIFO, (2) average cost, and (3) LIFO.

(b) Which costing method produces the highest ending inventory valuation?

Transcribed Image Text:

Beginning inventory Purchases Freight-in Purchase discounts Net sales Cost Hardcovers Retail Paperbacks Cost Retail $ 260,000 $ 400,000 $ 63,000 $ 90,000 1,180,000 1,800,000 268,000 380,000 5,000 2,000 15,000 4,000 1,810,000 363,000