Ortiz Department Store utilizes the retail inventory method to estimate its inventories. It calculated its cost to retail ratio during the period at 70%. Goods available for sale at retail amounted to $600000 and goods were sold during the period for $440000. The estimated cost of the ending inventory is
A) $112000.
B) $160000.
C) $308000.
D) $420000.

Question

Quizplus · Accepted Answer

Cost of ending inventory = (Cost to retail ratio x Goods available for sale at retail) - (Cost to retail ratio x Goods sold during the period)= (70% x $600,000) - (70% x $440,000)= $420,000 - $308,000= $112,000

Ortiz Department Store Utilizes the Retail Inventory Method to Estimate