The records of Alaina Co. provide the following information for the year ended December 31:?

Question

January 1 beginning inventory . . . . . . . $ 81,670 $114,610

Cost of goods purchased . . . . . . . . . . . 492,250 751,730

Sales . . . . . . . . . . . . . . . . . . . . . . . . . 786,120

Sales returns . . . . . . . . . . . . . . . . . . . . 4,480

1. Use the retail inventory method to estimate the company’s year-end inventory.

2. A year-end physical inventory at retail prices yields a total inventory of $78,550. Prepare a calculation

showing the company’s loss from shrinkage at cost and at retail

Answer 1

Q1.

81,670 + 492,250 = 573,920.

114,610 + 751,730 = 866,340.

573,920 / 866,340 = 66% cost/retail ratio.

114,610 + 751,730 - 786,120 + 4480 =       $84,700 est. end inv @ retail.

$84,700 x 66% = $55,902 end inv @ cost.

Q2.

$84,700 - 78,550 = $6,150 loss @ retail prices.

78,550 x 66% = 51,843 ye phys inv @ cost.

55,902 - 51,843 = $4,059 loss @ cost.