Chapter $6$ Homework

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Retail method; gross profit method

Selected data on inventory, purchases, and sales for Celebrity Tan Co$.$ and Ranchworks Co$.$ are as follows:

Line Item Description Cost Retail

Celebrity Tan Co$.$

Inventory, August $1$ $$300,000$ $$575,000$

Transactions during August:

Purchases $($net$)2,021,9003,170,000$

Sales $3,250,000$

Ranchworks Co$.$

Inventory, March $1$ $$880,000$

Transactions during March through November:

Purchases $($net$)9,500,000$

Sales $15,800,000$

Estimated gross profit rate $38\%$

Required:

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$1.$ Determine the estimated cost of the inventory of Celebrity Tan Co$.$ on August $31$ by the retail method, presenting details of the computations. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Celebrity Tan Co$.$

Estimated Cost of Inventory

August $31$

Line Item Description Ratio Cost Retail

$$-$ Select $-$

$$-$ Select $-$

$-$ Select $-$

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$$-$ Select $-$

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Ratio of cost to retail price: Ratio of cost to retail price:

$\%$

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Feedback

Calculate the amount of merchandise available for sale at both cost and retail. Divide the cost figure by the retail amount to get the ratio of cost to retail. Subtract retail sales from retail goods available for sale to obtain the ending inventory and multiply this by the cost to retail ratio.

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$2$a$.$ Estimate the cost of the inventory of Ranchworks Co$.$ on November $30$ by the gross profit method, presenting details of the computations. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Ranchworks Co$.$

Estimated Cost of Inventory

November $30$

Line Item Description Cost Cost

Inventory, March $1$

$Inventory, March $1$

$-$ Select $-$

$$-$ Select $-$

$$-$ Select $-$

$-$ Select $-$

$-$ Select $-$

$$-$ Select $-$

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$2$b$.$ Assume that Ranchworks Co$.$ took a physical inventory on November $30$ and discovered that $$369,750$ of inventory was on hand. What was the estimated loss of inventory due to theft or damage during March through November?

$fill in the blank f$38$f$4$ff$9607$afda$\_1$