On the basis of the following data, what is the estimated cost of the merchandise inventory on May 31 using the retail method?? $\begin{array}{llrr}&&\text { Cost } & \text { Retail } \
\text { May 1 } & \text { Merchandise inventory } & \$ 125,000 & \$ 166,667 \
\text { May 1-31 } & \text { Purchases } & 235,000 & 313,333 \
\text { May 1-31 } & \text { Sales } & & 230,000
\end{array}$
A) $250,000
B) $360,000
C) $172,500
D) $187,500

Question

Quizplus · Accepted Answer

To estimate the cost of the merchandise inventory on May 31 using the retail method, first, calculate the cost-to-retail ratio: $\frac{\$125,000 + \$235,000}{\$166,667 + \$313,333} = \frac{\$360,000}{\$480,000} = 0.75$. Then, calculate the ending inventory at retail by subtracting sales from the total retail value of goods available for sale: \$480,000 - \$230,000 = \$250,000. Finally, apply the cost-to-retail ratio to the ending inventory at retail: \$250,000 * 0.75 = \$187,500.

On the Basis of the Following Data, What Is the Estimated