I. (Retail Inventory Method) Presented below is information related to EDK Inc.

		Cost		Retail
Inventory, May 1		$ 64,000		$ 98,000
Purchases in May		71,000		105,600
Freight-in		3,000
Purchase returns		2,500		3,000
Transfers out to a nearby branch		7,600		9,000
Net markups				6,000
Net markdowns				3,500
Inventory losses due to normal breakage				850
Sales at retail				110,000
Sales returns				3,600

Instructions:

1. Compute the inventory for this department as of May 31, at retail prices.
2. Compute the ending inventory using lower-of-average-cost-or-market.
3. Briefly describe the accounting features of the retail inventory method.
4. Describe the conditions that may distort the results under the retail inventory method. (e) Discuss the advantages of using the retail method with those of using cost methods of inventory pricing.