The records for the Clothing Department of Ji-Woon’s Department Store are summarized as follows for the month of January:

1. Inventory, January 1: at retail, $28,000; at cost, $18,000

2. Purchases in January: at retail, $147,000; at cost, $110,000

3. Freight in: $6,000

4. Purchase returns: at retail, $3,500; at cost, $2,700

5. Purchase allowances: $2,200

6. Transfers in from suburban branch: at retail, $13,000; at cost, $9,200

7. Net markups: $8,000

8. Net markdowns: $4,000

9. Inventory losses due to normal breakage and so on: at retail, $400

10. Sales at retail: $121,000

11. Sales returns: $2,400

Instructions

a. Estimate the inventory for this department as at January 31 at (1) retail and (2) cost using the retail method. Round the cost-to-retail ratio to two decimal places.

b. Assume that a physical inventory count taken at retail prices after the close of business on January 31 indicated an inventory amount that is $450 less than what was estimated in part (a), item (1).What could have caused this discrepancy?