A Company Uses the Retail Method of Inventory

question 84

Essay

A company uses the retail method of inventory. Data for the year 2013 follows. Compute the ending inventory at cost, assuming FIFO, LCM.
Beginning inventory (cost $19,840, retail $30,000)
Purchases (net cost $53,360, retail $86,000)
Mark-up (net, $6,000)
Markdowns (net, $2,000)

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Definitions:

Interim Accounting Period

A financial reporting period that is shorter than a full fiscal year, often quarterly or monthly.

Financial Statements

Reports that summarize the financial performance, position, and cash flows of a business over a specific period.

Owner's Drawings Account

An account used to record withdrawals of assets from a business by the owner for personal use.

Income Summary Account

A temporary account used in accounting to transfer revenues and expenses at the end of an accounting period; its balance is ultimately transferred to retained earnings.