Homework Tutorials: P 9-6 Retail inventory method; conventional. Grand Department Store, Inc., uses the retail inventory

Grand Department Store, Inc., uses the retail inventory

P 9-6 Retail inventory method; conventional. Grand Department Store, Inc., uses the retail inventory

ANSWER KEY P 9-6 Retail inventory method; conventional.

Grand Department Store, Inc., uses the retail inventory method to estimate ending inventory for its monthly financial statements. The following data pertain to a single department for the month of October 2011:

Inventory, October 1, 2011:

At cost $20,000

At retail 30,000

Purchases(exclusive of freight and returns):

At cost 100,151

At retail 146,495

Freight – in 5,100

Purchase returns:

At cost 2,100

At retail 2,800

Additional mark-ups 2,500

Markup collections 265

Markup downs(net) 800

Normal spoilage and breakage 4,500

Sales 135,730

Required:

1. Using the conventional retail method, prepare a schedule computing estimated lower-of-cost-or-market inventory for October 31, 2011.

2. A department store using the conventional retail inventory method estimates the cost of its ending inventory as $29,000. An accurate physical count reveals only $22,000 of inventory at lower of cost or market. List the factors that may have caused the difference between computed inventory and the physical count.

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P 9-6 Retail inventory method; conventional. Grand Department Store, Inc., uses the retail inventory