The following data are taken from the records of the Harper Promotions Ltd.:
|
Opening inventory |
Transportation-in |
$ 500 |
|||
|
At retail |
$ 7,000 |
Purchase returns |
|||
|
At cost |
5,000 |
At retail |
2,000 |
||
|
Purchases |
At cost |
1,500 |
|||
|
At retail |
25,000 |
Sales |
22,000 |
||
|
At cost |
16,000 |
Sales Returns |
1,000 |
||
|
Required: |
||
|
1. |
a. |
Calculate ending inventory at retail. |
|
b. |
Calculate the cost of goods available at cost divided by cost of goods available at retail. |
|
|
c. |
Calculate the ending inventory at cost. |
|
|
2. |
Calculate the ending inventory at cost using the gross profit method. Assume a gross profit rate of 35 per cent. |
|
|
3. |
Explain why the ending inventory is different under the two methods. |
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