Retail Method.
Olivia's Dress Shop had net retail sales of $125,000 during the current year. The following additional information was obtained from the company's accounting records:
At Cost At Retail
Beginning inventory $20,000 $ 30,000
Net purchases (excluding freight-in) 70,000 110,000
Freight-in 5,200
Using the retail method, estimate the company's ending inventory at cost.
Assume that a physical inventory taken at year end revealed an inventory on hand of $9,000 at retail value. What is the estimated amount of inventory shrinkage (loss due to theft, damage, etc.) at cost using the retail method?