Overland Company switched recently to the retail inventory method to estimate the cost of ending SO 7 Retail Inventory Method inventory. To test this method, the company took a physical inventory one month after its implementation. Cost, retail, and the physical inventory data are as follows:

REQUIRED 1. Prepare a schedule to estimate the amount of Overland's July 31 inventory using the retail method.
2. Use Overland's cost ratio to reduce the retail value of the physical inventory to cost.
3. Calculate the estimated amount of inventory shortage at cost and at retail.

Transcribed Image Text:

At Cost July 1 Beginning Inventory 472,132 Purchases 750,000 At Retail 622,800 1,008,400 Purchases Returns and Allowances (25,200) (34,800) Freight In 8,350 Sales 1,060,000 Sales Returns and Allowances (28,000) July 31 Physical Inventory 508,200