Acc280 Financial Accounting: P6-11A Neer Department Store uses the retail inventory method

Acc280 Financial Accounting

P6-11A Computing ending inventory using retail method
Neer Department Store uses the retail inventory method to estimate its monthly ending inventories. The following information is available for two of its departments at August 31, 2011.
Sporting Goods Jewelry and Cosmetics
Cost Retail Cost Retail
Net sales 1,000,000 1,160,000
Purchases 675,000 1,066,000 741,000 1,158,000
Purchase returns (26,000) (40,000) (12,000) (20,000)
Purchase discounts (12,360) - (2,440) -
Freight-in 9,000 - 14,000 -
Beginning inventory 47,360 74,000 39,440 62,000

At December 31, Neer Department Store takes a physical inventory at retail. The actual retail values of the inventories in each department are Sporting Goods $95,000, and Jewelry and Cosmetics $44,000.

Instructions:
a. Determine the estimated cost of the ending inventory for each department on August 31, 2011, using the retail inventory method. (Round cost-to-retail ratio to 2 decimal places , e.g. 10.50 in computations. Round final answers to 0 decimal places, e.g. 125.)
b. Compute the ending inventory at cost for each department at December 31, assuming the cost-to-retail ratios are 60% for Sporting Goods and 64% for Jewelry and Cosmetics.
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