Retail Inventory Method

Harmes Company is a clothing store that uses the retail inventory method. The following information relates to its operations during the year:

Cost Retail

Inventory, January 1	$32,500	$65,000
Purchases	130,000	223,138
Markups (net)		3,000
Markdowns (net)		2,000
Sales		180,000

1. Compute the ending inventory by the retail inventory method for the following cost flow assumption: FIFO. Round the cost-to-retail ratio to three decimal places. HARMES COMPANY Calculation of ending inventory by retail inventory method FIFO Cost Retail 130,000 223,138 Purchases Add: Markups (net) Less: Markdowns (net) 0 3,000 0 -2,000 x 130,000 224,138 0.560 X Cost-to-retail ratio: Beginning inventory Goods available for sale Less: Sales Ending inventory ill 000) Feedback 2. Compute the ending inventory by the retail inventory method for the following cost flow assumption: Average cost. Round the cost-to-retail ratio to three decimal places. HARMES COMPANY Calculation of ending inventory by retail inventory method Average Cost Cost Retail Beginning inventory Purchases Add: Markups (net) Less: Markdowns (net) Goods available for sale Cost-to-retail ratio Less: Sales 88 Ending inventory 3. Compute the ending inventory by the retail inventory method for the following cost flow assumption: LIFO. Round the cost-to-retail ratio to three decimal places. HARMES COMPANY Calculation of ending inventory by retail inventory method LIFO Cost Retail Beginning inventory Cost-to-retail ratio Purchases Add: Markups (net) Less: Markdowns (net) Q 1000 Op Goods available for sale Cost-to-retail ratio Less: Sales Ending inventory Feedback 1. Compute the ending inventory by the retail inventory method for the following cost flow assumption: Lower of cost or market (based on average cost). Round the cost-to-retail ratio to three decimal places HARMES COMPANY Calculation of ending inventory by retail inventory method Lower of Cost or Market (based on average cost) Cost Retail Beginning inventory Purchases Add: Markups (net) Cost-to-retail ratio Less: Markdowns (net) Goods available for sale 10000000 OOO OOO Less: Sales Ending inventory