PR 6-7A

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)	2,021,900	3,170,000
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:

Question Content Area

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.

Line Item Description	Ratio	Cost	Retail
Inventory, at estimated costInventory, August 1Inventory, August 31, at retailMerchandise available for saleSalesSales returns and allowances		$- Select -	$- Select -
Inventory, August 31, at estimated costInventory, August 31, at retailMerchandise available for saleNet purchasesSalesSales returns and allowances		- Select -	- Select -
Inventory, August 31, at estimated costInventory, August 1Inventory, August 31, at retailMerchandise available for saleSalesSales returns and allowances		$- Select -	$- Select -
Ratio of cost to retail price:	Ratio of cost to retail price:%
Inventory, August 31, at estimated costInventory, August 1Inventory, August 31, at retailMerchandise available for saleNet purchasesSales			- Select -
Inventory, August 1Inventory, August 31, at retailMerchandise available for saleNet purchasesSalesSales returns and allowances			$- Select -
Inventory, August 31, at estimated costInventory, August 1Merchandise available for saleNet purchasesSalesSales returns and allowances			$- Select -

Question Content Area

2a. 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.

Line Item Description	Cost	Cost
Estimated cost of goods soldEstimated inventory, November 30Inventory, March 1Merchandise available for saleSalesSales returns and allowances		$- Select -
Estimated cost of goods soldEstimated gross profitEstimated inventory, November 30Merchandise available for saleNet purchasesSalesSales returns and allowances		- Select -
Estimated cost of goods soldEstimated gross profitEstimated inventory, November 30Merchandise available for saleInventory, March 1SalesSales returns and allowances		$- Select -
Estimated cost of goods soldEstimated gross profitEstimated inventory, November 30Inventory, March 1Merchandise available for saleNet purchasesSales	$- Select -
Estimated gross profitEstimated inventory, November 30Inventory, March 1Merchandise available for saleNet purchasesSalesSales returns and allowances	- Select -
Estimated cost of goods soldEstimated gross profitInventory, March 1Merchandise available for saleNet purchasesSalesSales returns and allowances		- Select -
Estimated gross profitEstimated inventory, November 30Inventory, March 1Merchandise available for saleNet purchasesSalesSales returns and allowances		$- Select -

Question Content Area

2b. 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 6dcebbf87f88055_1