Question:E9-20.(Retail Inventory Method)

(LO5) Presented below is information related to Bobby Engram Company.

Cost

Retail

Beginning inventory

$58,000

$100,000

Purchases (net)

$122,000

$200,000

Net markups

$10,345

Net markdowns

$26,135

Sales revenue

$186,000

Instructions

(a)Compute the ending inventory at retail.

• (b)Compute a cost-to-retail percentage (round to two decimals) under the following conditions.1.Excluding both markups and markdowns.
• 2.Excluding markups but including markdowns.
• 3.Excluding markdowns but including markups.
• 4.Including both markdowns and markups.
• (c)Which of the methods in (b) above (1, 2, 3, or 4) does the following?
• 1.Provides the most conservative estimate of ending inventory.
• 2.Provides an approximation of lower-of-cost-or-market.
• 3.Is used in the conventional retail method.

(d)Compute ending inventory at lower-of-cost-or-market (round to nearest dollar).

(e)Compute cost of goods sold based on (d).

(f)Compute gross margin based on (d).