1 answer

The inventory of Royal Decking consisted of five products. Information about the December 31, 2021, inventory...

Question:

The inventory of Royal Decking consisted of five products. Information about the December 31, 2021, inventory is as follows:

Almaden Valley Variety Store uses the retail inventory method to estimate ending inventory and cost of goods sold. Data for 2

The inventory of Royal Decking consisted of five products. Information about the December 31, 2021, inventory is as follows: Product Cost $ 54 Per Unit Replacement Cost $ 49 94 Selling Price $ 74 114 94 144 44 69 Uw 54 114 34 84 Selling costs consist of a sales commission equal to 15% of selling price and shipping costs equal to 5% of cost. The normal profit is 35% of selling price. Required: What unit value should Royal Decking use for each of its products when applying the lower of cost or market (LCM) rule to units of ending inventory? (Do not round intermediate calculations. Round final answers to 2 decimal places.) Product Cost Replacement cost NRV NRV - NP Market Per Unit Inventory Value $ 54.00 84 A $ 541 $ 49 194 5469 114 847 E 347 421
Almaden Valley Variety Store uses the retail inventory method to estimate ending inventory and cost of goods sold. Data for 2021 are as follows: Cost $ 14,000 104,600 8,600 5,000 Retail $ 22,000 167,000 Beginning inventory Purchases Freight-in Purchase returns Net markups Net markdowns Normal spoilage Net sales 8,000 7,000 4,000 4,400 154,000 Required: Complete the table below to estimate the ending inventory and cost of goods sold for 2021, applying the conventional retail method using the information provided. Cost Retail Cost-to-Retail Ratio Beginning inventory Plus: Purchases Freight-in Less: Purchase returns Plus: Net markups Less: Net markdowns Goods available for sale Cost-to-retail percentage Less: Normal spoilage Less: Net sales Estimated ending inventory at retail Estimated ending inventory at cost Estimated cost of goods sold

Answers

Lower of cost or market(LCM) rule to units of ending inventory

PRODUCT COST REPLACEMENT COST NRV NRV-NP MARKET PER UNIT INVENTORY VALUE
A 54 49

65.6

{74-(74×15%)-(54×5%)}

39.7

{65.6-(75×35%)}

49 49
B 94 84

101.6

{114-(114×15%)-(94×5%)}

61.7

{101.6-(114×35%)}

84 84
C 54 69

82.6

{94-(94×15%)-(54×5%)}

49.7

{82.6-(94×35%)}

69 54
D 114 84

128.1

{144-(144×15%)-(114×5%)}

88.2

{128.1-(114×35%)}

88.2 88.2
E

34

42

39.1

{44-(44×15%)-(34×5%)}

23.7

{39.1-(44×35%)}

39.1 34

NRV = selling price- selling cost

NRV- NP = NRV - 35%of selling price

Market = middle of replacement cost ,NRV,NRV-NP

Per unit inventory value = lower of cost or market.

Conventional retail method

Cost Retail
Beginning inventory 14,000 22,000
Plus: purchases 104,600 167,000
Freight in 8,600
Less: purchase returns (5,000) (8,000)
Plus: net markups 7,000
Cost to retail percentage 122,000÷188,000= 65%
Less: net markdowns (4,000)
Goods available for sale 122,000 184,000
Less: Normal spoilage (4,400)
Net sales (154,000)
Estimated ending inventory at retail 25,600
Estimated Ending inventory at cost (25,600×65%) (16,640)
Estimated cost of goods sold 105,560

____×____

Any doubt please comment

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