Question: The Red Department Store uses the retail inventory method. Information relating to the computation of the inventory at December 31, 2007 is as follows: Estimated

The Red Department Store uses the retail inventory method. Information relating to the computation of the inventory at December 31, 2007 is as follows:

Estimated normal shrinkage is 2% of sales.
Required
Prepare a schedule to calculate the estimated ending inventory at the lower of average cost or market at December 31, 2007, using the retail inventory method. Show supporting computations in goodform.

Cost Retail Cost Retail Inventory at January 1, 2007 Sales Purchases Freight-in $60,000 600,000 Markup cancellations-10,000 25,000 S 32,000 $80,000 Markups 270,000 590,000 Markdowns 7,600 -Markdown cancellations 5,000

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