Given the following information for Miller, Inc.:
?
?
Cost
Retail
Markdown cancellations
$950
Markup cancellations
3,500
Employee discounts
1,020
Purchase returns
$1,030
1,520
Purchases
35,400
46,787
Inventory, January 1
7,160
13,820
Purchase discounts taken
756
?
Freight-in
4,000
?
Markups
14,500
Markdowns
2,600
Sales
?
56,700
Required:
a.Determine the inventory value using the retail inventory method and the FIFO cost flow assumption. Round off any decimals to two places.b.Determine the inventory value using the retail inventory method and the lower of average cost or market cost flow assumption.
What will be an ideal response?
| a | FIFO inventory = $7,395, determined as follows: | |||||
| ? | ? | ? | ? | |||
| ? | ? | Cost | Retail | |||
| ? | Purchases | $35,400 | $46,787 | |||
| ? | Purchase returns | (1,030) | (1,520) | |||
| ? | Purchase discounts | (756) | ? | |||
| ? | Freight-in | 4,000 | ? | |||
| ? | Net markups | ? | 11,000 | |||
| ? | Net markdowns | ? | (1,650) | |||
| ? | ? | $37,614 | $54,617 | |||
| ? | ? | ? | ? | |||
| ? | Cost-to-retail ratio: | ? | ? | |||
| ? | $37,614/$54,617 = 0.69 (rounded) | ? | ? | |||
| ? | ? | ? | ? | |||
| ? | Beginning inventory | 7,160 | 13,820 | |||
| ? | Goods available for sale | $44,774 | $68,437 | |||
| ? | Less: | Sales | ? | (56,700) | ||
| ? | ? | Employee discounts | ? | (1,020) | ||
| ? | Ending inventory at retail | ? | $10,717 | |||
| ? | Ending inventory at FIFO cost (0.69´$10,717) | $ 7,395 | ? | |||
| ? | ? | ? | ? | |||
| b. | Lower of average cost or market inventory: | |||||
| ? | Cost ratio: | $44,774/($68,437 + $1,650) | = 0.64 (rounded) | |||
| ? | 0.64´$10,717 | = $6,859 | ||||
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