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Hoover Co
Hoover Co. uses the retail inventory method. The following information is available for the current year.
Cost Retail
Beginning inventory $ 78,000 $122,000
Purchases 295,000 415,000
Freight-in 5,000 —
Employee discounts — 2,000
Net markups — 15,000
Net markdowns — 20,000
Sales — 390,000
a) If the ending inventory is to be valued at approximately lower-of-average-cost-or-net realizable value, the calculation of the cost ratio should be based on cost of ? $_________ and retail of ?$_________ respectively.
b) The ending inventory at retail should be? $ ____________
c) The approximate cost of the ending inventory by the conventional retail method is _______ $
Expert Solution
a) If the ending inventory is to be valued at approximately lower-of-average-cost-or-net realizable value, the calculation of the cost ratio should be based on cost of $378,000 and retail of $552,000 respectively.
b) The ending inventory at retail should be $140,000.
c) The approximate cost of the ending inventory by the conventional retail method is $95,869.57 or $95,870.
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