Fuque Inc. uses the retail inventory method to estimate ending inventory for its monthly financial statements. The following data pertain to a single
Fuque 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
\r\nOctober 2015.
\r\nInventory, October 1, 2015
\r\nAt cost $ 52,000
\r\nAt retail 78,000
\r\nPurchases (exclusive of freight and returns)
\r\nAt cost 272,000
\r\nAt retail 423,000
\r\nFreight-in 16,600
\r\nPurchase returns
\r\nAt cost 5,600
\r\nAt retail 8,000
\r\nMarkups 9,000
\r\nMarkup cancellations 2,000
\r\nMarkdowns (net) 3,600
\r\nNormal spoilage and breakage 10,000
\r\nSales revenue 390,000
\r\nInstructions
\r\n(a) Using the conventional retail method, prepare a schedule computing estimated lower-of-cost-ormarket inventory for October 31, 2015.
\r\n(b) A department store using the conventional retail inventory method estimates the cost of its ending inventory as $60,000. An accurate physical count reveals only $47,000 of inventory at lower-of-costor- market. List the factors that may have caused the difference between the computed inventory and the physical count.