Warmer's Dress Shop had net retail sales of $250,000 during the current year. The following additional information was obtained from the company's accounting records:
|
At Cost
|
At retail
|
Beginning inventory
|
$ 40,000
|
$ 60,000
|
Net purchases (excluding freight-in)
|
140,000
|
220,000
|
Freight-in
|
10,400
|
|
1. Using the retail method, estimate the company's ending inventory at cost.
2. Assume that a physical inventory taken at year end revealed an inventory on hand of $18,000 at retail value. What is the estimated amount of inventory shrinkage (loss due to theft, damage, etc.) at cost using the retail method?