The retail inventory method requires a company to value its inventory on the balance sheet at retail prices.?

Question

That is true?

Answer 1

False.

"The retail inventory method of estimating inventory cost is based on the relationship of the cost of merchandise available for sale to the retail price of the same merchandise."

Example: "A business using the retail method of inventory costing determines that merchandise inventory at retail is $900,000. If the ratio of cost to retail price is 70%, what is the amount of inventory to be reported on the financial statements?

Answer is $630,000 = ($900,000 x 70%)."

From this example, you can see that inventory is NOT valued on the balance sheet at retail prices.