Between The Ears (BTE.com) is a popular Internet music store. During the current year, the...
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Between The Ears (BTE.com) is a popular Internet music store. During the current year, the companys cost of goods available for sale amounted to $462,000. The retail sales value of this merchandise amounted to $849,000. Sales for the year were $753,000. At year-end, BTE.com takes a physical inventory. The general manager walks through the warehouse counting each type of product and reading its retail price into a recorder. From the recorded information, another employee prepares a schedule listing the entire ending inventory at retail sales prices. The schedule prepared for the current year reports ending inventory at $35,741 at retail sales prices. Required: a. Using the retail method, estimate (1) the cost of goods sold during the year and (2) the inventory at the end of the year. b-1. Use the cost ratio computed in part a to reduce the inventory counted by the general manager from its retail value to an estimate of its cost. b-2. Determine the estimated shrinkage losses (measured at cost) incurred by BTE.com during the year. b-3. Compute BTE.com's gross profit for the year. (Include inventory shrinkage losses in the cost of goods sold.)
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