Problem:
Fuque Inc. uses the retail inventory method to estimate ending inventory for its monthly financial statements. The following data pertain to a single department for the month of OCtober 2013.
Inventory, October 1, 2013
- At cost................................ $ 52000
- At retail............................... 78000
- Purchases
- At cost................................ 272000
- At retail............................... 423000
- Freight in............................. 16600
- Purchase Returns
- At cost................................ 5600
- At retail.............................. 8000
- Markups............................... 9000
- MArkup Cancellation................ 2000
- Markdowns........................... 3600
- Normal Spoilage and breakage... 10000
- Sales................................... 390000
Required:
Question 1: Using the conventional retail method, prepare a schedule computing estimated lower of cost or market inventory for October 31, 2013.
Question 2: A department store using the conventional retail inventory method estimates the cost of its ending inventory as $60000. An accurate physical count reveals only $47000 of inventory at lower of cost or market. List the factors that may have caused the difference between the computed inventory and the physical count.
Note: Please describe comprehensively and provide step by step solution.