Retail Inventory Method Fuque Inc. uses the retail inventory method to estimate ending inventory for its monthly financial statements. The following data pertain to a single department for the month of October 2011.

(a) Using the conventional retail method, prepare a schedule computing estimated lower of-cost-or-market inventory for October 31, 2011.

(b) A department store using the conventional retail inventory method estimates the cost of its ending inventory as $60,000. An accurate physical count reveals only $47,000 of inventory at lower-of-cost-or-market. List the factors that may have caused the difference between the computed inventory and the physicalcount.

Transcribed Image Text:

Inventory, October 1, 2011 At cost $ 52,000 78,000 At retail Purchases (exclusive of freight and returns) 272,000 423,000 16,600 At cost At retail Freight-in Purchase returns At cost 5,600 8,000 9,000 2,000 3,600 At retail Markups Markup cancellations Markdowns (net) Normal spoilage and breakage 10,000 Sales 390,000