James Sales Company uses the retail inventory method to value its merchandise inventory. The following information is available for the current year: Cost Retail Beginning inventory$ 30,000$ 45,000 Purchases175,000240,000 Freight-in2,500 - Net markups-9,500 Net markdowns-10,000 Sales revenue-205,000 If the ending inventory is to be valued at the lower-of-cost-or-market, what is the cost-to-retail ratio?

a. $207,500 : $285,000

b. $207,500 : $293,500

c. $207,500 : $295,000

d. $207,500 : $294,500

e. 205,000 : $293,500

Question

Abril Fry

Business

22 December, 12:47

James Sales Company uses the retail inventory method to value its merchandise inventory. The following information is available for the current year: Cost Retail Beginning inventory$ 30,000$ 45,000 Purchases175,000240,000 Freight-in2,500 - Net markups-9,500 Net markdowns-10,000 Sales revenue-205,000 If the ending inventory is to be valued at the lower-of-cost-or-market, what is the cost-to-retail ratio?

a. $207,500 : $285,000

b. $207,500 : $293,500

c. $207,500 : $295,000

d. $207,500 : $294,500

e. 205,000 : $293,500

+2

Answers (1)

Know the Answer?

Mason Stephenson · Answer 1

Option (D) is correct.

Explanation:

Given that,

Cost = Beginning inventory + Purchases + Freight in

= 30,000 + 175,000 + 2,500

= $207,500

Retail = Beginning inventory + Purchases + Net markups

= 45,000 + 240,000 + 9,500

= $294,500

Cost to retail ratio:

= $207,500 : $294,500

= 0.7046

Therefore, the cost to retail ratio is 0.7046.