Answer :
Cost retail beginning inventory $ 70,000 $ 107,000 net purchases 302,290 450,000 net markups 23,000 net markdowns 43,000 net sales 402,000 estimated ending inventory at cost is $119,846.
What is the retail method?
By comparing the cost of goods to the cost of the goods, the retail technique calculates the ending balance for a shop. The retail inventory approach incorporates the cost-to-retail ratio together with sales and inventory over a time period. use the following steps:
Step 1: Calculation of the cost-to-retail ratio
This can be calculated as follows:
Net purchases at cost = $385,560
Adjusted net purchase at retail price
= Net purchases at retail price + Net markups - Net markdowns
= $560,000 + $34,000 - $54,000
= $540,000
Cost to retail ratio
= Net purchases at cost / Adjusted net purchase at retail price
= $385,560 / $540,000
= 0.7140, or 71.4%
Step 2: Calculation of the LIFO layer
Ending inventory at retails price
= Adjusted net purchase at retail price + Beginning inventory - Net sales
= $540,000 + $118,000 - $501,000
= $157,000
LIFO layer
= Ending inventory at retails price - Beginning inventory
= $157,000 - $118,000
= $39,000
Step 3: Estimation of the cost of the final inventory
Inventory beginning at cost equals inventory ending at cost plus ($39,000 * 71.4% * LIFO layer) + ($92,000 * (LIFO layer * Cost to Retail Ratio)
= $119,846.
Therefore, the estimated ending inventory at cost is $119,846.
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