Conventional retail method; employee discounts
Response to the following problem:
LeMay Department Store uses the retail inventory method to estimate ending inventory for its monthly financial statements. The following data pertain to one of its largest departments for the month of March 2016:
|
|
Cost
|
Retail
|
|
Beginning inventory
|
$ 40,000
|
$ 60,000
|
|
Purchases
|
207,000
|
400,000
|
|
Freight-in
|
14,488
|
|
|
Purchase returns
|
4,000
|
6,000
|
|
Net markups
|
|
5.800
|
|
Net markdowns
|
|
3,500
|
|
Normal breakage
|
|
6,000
|
|
Net sales
|
|
280,000
|
|
Employee discounts
|
|
1,800
|
Sales are recorded net of employee discounts
Required:
1. Compute estimated ending inventory and cost of goods sold for March applying the conventional retail method.
2. Recompute the cost-to-retail percentage using the average cost method.