Frontenac Books uses the retail inventory method to estimate its monthly ending inventories. The following information is available for two of its departments at October 31, 2008.

At December 31, Frontenac Books takes a physical inventory at retail. The actual retail values of the inventories in each department are Hardcovers \($395,000\) and Paperbacks \($88,000.\)

Instructions

(a) Determine the estimated cost of the ending inventory for each department at October 31, 2008, 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.

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Cost Hardcovers Retail Paperbacks Cost Retail Beginning inventory Purchases Freight-in Purchase discounts Net sales $ 256,000 $ 400,000 1,825,000 $ 65,000 $ 90,000 1,180,000 266,000 380,000 4,000 2,000 16,000 4,000 1,827,000 385,000