*P6-11B Frontenac Books uses the retail inventory method to estimate its monthly ending inventories. The following information is available for two of its departments at October 31, 2008.
Hardcovers Paperbacks
Cost Retail Cost Retail
Beginning inventory $ 256,000 $ 400,000 $ 65,000 $ 90,000
Purchases 1,180,000 1,825,000 266,000 380,000
Freight-in 4,000 2,000
Purchase discounts 16,000 4,000
Net sales 1,827,000 385,000
At December 31, Frontenac Books takes a physical inventory at retail.The actual retail values of the inventories in each department are Hardcovers $395,000 and Paperbacks $88,000.
Instructions
(a) Determine the estimated cost of the ending inventory for each department at October 31, 2008, using the retail inventory method.
(b) Compute the ending inventory at cost for each department at December 31, assuming the cost-to-retail ratios for the year are 65% for hardcovers and 70% for paperbacks.
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