A company reports the following information regarding its inventory. Beginning inventory: cost is $80,000;retail is $130,000
Net purchases: cost is $65,000;retail is $120,000
Sales at retail: $145,000
The year-end inventory shows $135,000 worth of merchandise available at retail prices.What is the cost of the ending inventory calculated using the retail inventory method?
A)$135,000.
B)$73,125.
C)$78,300.
D)$72,900.
E)$105,000.

Question

Quizplus · Accepted Answer

1. Calculate the cost-to-retail percentage:
Cost + Net Purchases / Retail = $80,000 + $65,000 / $130,000 + $120,000 = 1.0769 or 107.69%

2. Calculate the cost of ending inventory at retail prices:
Ending Inventory Retail x Cost-to-Retail Percentage = $135,000 x 107.69% = $145,653

3. Calculate the cost of ending inventory:
Ending Inventory Retail - Ending Inventory Cost = $145,653 - $78,300 = $67,353 or approximately $73,125 rounded to the nearest dollar.

Therefore, the best choice is C.

A Company Reports the Following Information Regarding Its Inventory