Fuque Ltd. 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 2019.
Inventory, October 1, 2019
At cost..........................................£ 52,000
At retail............................................78,000
Purchases (exclusive of freight and returns)
At cost............................................272,000
At retail..........................................423,000
Freight-in..........................................16,600
Purchase returns
At cost..............................................5,600
At retail.............................................8,000
Markups.............................................9,000
Markup cancellations..............................2,000
Markdowns (net) .................................3,600
Normal spoilage and breakage.................10,000
Sales.............................................390,000
Instructions
a. Using the conventional retail method, prepare a schedule computing estimated LCNRV inventory for October 31, 2019.
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 LCNRV. List the factors that may have caused the difference between the computed inventory and the physical count.