Corabia Dress Shop had net retail sales of $250,000 during the current year. The following additional information was obtained from the company's accounting records:

1. Using the retail method, estimate the company's ending inventory at cost.
2. Assume that a physical inventory taken at year end revealed an inventory on hand of $18,000 at retail value. What is the estimated amount of inventory shrinkage (loss due to theft, damage, etc.) at cost using the retail method?

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At Cost At Retail 40,000 60,000 10,400 $ ) Beginning inventory Net purchases Freight-irn (excluding freight-in) 40,000 220,000