Estimate the cost of ending inventory for August for Roman's Jewelry Store using the retail method on the following data:
Cost Retail
Beginning inventory for August $180,000 $288,000
Purchases during August $70,000 $112,000
Net sales during August $80,000
Find the net date for an invoice dated August 7, with terms 4/20, 50 Extra.
To estimate the cost of ending inventory for August using the retail method, we need to calculate the Cost-to-Retail Ratio, which is the ratio of the total cost of goods available for sale to the total retail value of goods available for sale.
First, let's calculate the total cost and total retail value of goods available for sale:
Beginning inventory for August:
Cost = $180,000
Retail = $288,000
Purchases during August:
Cost = $70,000
Retail = $112,000
To calculate the total cost and total retail value of goods available for sale, we add the beginning inventory and purchases for August:
Total Cost = Beginning Inventory Cost + Purchases Cost
= $180,000 + $70,000
= $250,000
Total Retail = Beginning Inventory Retail + Purchases Retail
= $288,000 + $112,000
= $400,000
Now, let's calculate the Cost-to-Retail Ratio:
Cost-to-Retail Ratio = Total Cost / Total Retail
= $250,000 / $400,000
= 0.625
Next, we need to calculate the estimated cost of ending inventory using the Cost-to-Retail Ratio and the net sales for August:
Estimated Cost of Ending Inventory = Total Retail - (Net Sales x Cost-to-Retail Ratio)
= $400,000 - ($80,000 x 0.625)
= $400,000 - $50,000
= $350,000
Therefore, the estimated cost of ending inventory for August for Roman's Jewelry Store using the retail method is $350,000.