Question 2 (Retail inventory method: 18 marks) Mercury Inc

Question 2 (Retail inventory method: 18 marks) Mercury Inc. is a grocery sales chain company. It uses Retail Inventory method to value its ending inventory. Presented below is information related to various inventory transactions during year 2021. Cost Inventory, Jan. 1. 2021 Purchases Transfer-in from affiliated companies Purchase returns 2,000 50,000 15.000 3,000 Retail $3,200 80,000 30,000 4,500 Additional information for the year • Freight-in cost: 5800 • Purchase discounts: $4,000 • Total sales (actual sales amount recorded in the account, which is already reduced by employee discounts): $70,000 (that is, if not discounted for employees, total sales would have been $75,500) • Sales returns: 58,000 • Markups: $5,000 • Markup cancellations: S1,000 • Markdowns: $3,500 • Markdown cancellations: S1,100 • Employee discounts: $5,500 • Normal shortages: $850 (cost), S1,500 (retail) • Abnormal shortages: S6,000 (cost), S12,000 (retail) Required: 1) To approximate the LCNRV, should Mercury Inc. choose the conventional retail inventory method or the cost method? Explain the rationale and the underlying concept of LCNRV. (5 marks) 2) Using the template given below, compute the cost of ending inventory as of Dec. 31. 2021 based on Retail Inventory method using the "Conventional Method" (round up to the whole dollar for amounts, round up to 4 decimals (= 2 decimal %) for cost-to-retail ratio) (13 marks) $$$ $$$ XXX de 202 to roka Cost story Retail Beginning inventory 2,000 3,200 XXX $$$ $$$ XXX $$$ XXX $$$ $$$ $$$ XXX $$$ $$$ XXX $$$ $$$ XXX 000000 $$$ $$$ XXX $$$ $$$ Goods available for sale Deduct: XXX $$$ XXX doo $$$ XXX $$$ XXX $$$ XXX $$$ XXX $$$ Ending inventory at retail $$$ Cost-to-retail ratio 0.0000 Ending inventory at cost $$$ $$$ $$$