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Cpa Review School of The Philippines Mani La

The document contains sample problems related to using the retail method to estimate inventory balances. Problem 1 asks the student to calculate ending inventory using the conservative retail method given beginning inventory, purchases, additional markup, markdowns, and sales. Problem 2 asks the student to calculate cost of goods sold for the year using the average cost retail method. Problem 3 provides additional information on purchases, markups, markdowns, and sales and asks the student to calculate ending inventory using the lower of average cost or NRV retail method.

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Justine Cruz
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45 views

Cpa Review School of The Philippines Mani La

The document contains sample problems related to using the retail method to estimate inventory balances. Problem 1 asks the student to calculate ending inventory using the conservative retail method given beginning inventory, purchases, additional markup, markdowns, and sales. Problem 2 asks the student to calculate cost of goods sold for the year using the average cost retail method. Problem 3 provides additional information on purchases, markups, markdowns, and sales and asks the student to calculate ending inventory using the lower of average cost or NRV retail method.

Uploaded by

Justine Cruz
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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CPA REVIEW SCHOOL OF THE PHILIPPINES

Mani la

FINANCIAL ACCOUNTING AND REPORTING VALIX/VALIX/ESCALA/SANTOS/DELA CRUZ

RETAIL METHOD

D 1. An entity provided the following information at year-end:


Cost Retail
Inventory, January 1 700,000 1,100,000
Net purchases 4,200,000 5,700,000
Additional markup 200,000
Markdown 100,000
Net sales 4,400,000
Under the conservative retail method, what is the inventory at year-end?
a. 1,820,000
b. 2,500,000
c. 1,775,000
d. 1,750,000

D 2. An entity used the average cost retail method to account for inventory.
Cost Retail
Beginning inventory and net purchases 6,750,000 9,200,000
Net markup 400,000
Net markdown 600,000
Net sales 7,000,000
What amount should be reported as cost of goods sold for the current year?
a. 1,500,000
b. 2,000,000
c. 5,000,000
d. 5,250,000

D 3. At the beginning of current year, the inventory was P1,000,000 at retail and P560,000 at cost.
During the current year, the entity registered the following purchases:
Cost 4,000,000
Retail price 6,200,000
Original markup 2,200,000
The amount of net sales was P5,400,000. The following reductions were made in the retail price:
To meet price competition 50,000
To dispose of overstock 30,000
Miscellaneous reductions 120,000
During the current year, the selling price of a certain inventory increased from P200 to P300. This
additional markup applied to 5,000 items but was later canceled on the remaining 1,000 items.
What is the cost of ending inventory using the lower of average cost or NRV retail method?
a. 2,000,000
b. 1,320,000
c. 1,220,000
d. 1,200,000

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4. An entity used the retail inventory method to approximate the ending inventory. The following
information is available for the current year:
Cost Retail
Beginning inventory 650,000 1,200,000
Purchases 9,000,000 14,700,000
Freight in 200,000
Purchase returns 300,000 500,000
Purchase allowances 150,000
Departmental transfer in 200,000 300,000
Net markup 300,000
Net markdown 1,000,000
Sales 9,500,000
Sales discounts 100,000
Employee discounts 500,000
Estimated normal shoplifting losses 600,000
Estimated normal shrinkage 400,000

A 1. What is the estimated cost of ending inventory using the conservative approach?
a. 2,400,000
b. 2,460,000
c. 3,060,000
d. 2,700,000

A 2. What is estimated cost of ending inventory using the average cost approach?
a. 2,560,000
b. 2,624,000
c. 3,264,000
d. 2,880,000

A 5. An entity provided the following information:


Cost Retail
Beginning inventory 1,400,000 2,000,000
Net purchases 5,850,000 8,000,000
Net markup 1,500,000
Net markdown 500,000
Net sales 7,500,000
What is the estimated cost of ending inventory using the FIFO retail approach?
a. 2,275,000
b. 2,375,000
c. 2,310,000
d. 2,205,000

END

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