Retail Inventory Method– Multiple Choice Problems

1. Domicile Company had the following amounts all at 4. Abscond Company used the retail inventory method to
retail: estimate inventory for interim statement purposes
The entity provided the following information for the
Beginning inventory 180,000 current year
Purchases 6,000,000 Cost Retail
Purchase return 300,000 Beginning inventory 700,000 1,000,000
Net markup 900,000 Purchases 4,100,000 6,300,000
Abnormal shortage 200,000 Markup 700,000
Net markdown 140,000 Markdown 500,000
Sales 3,600,000 Sales 5,900,000
Sales return 90,000 Normal shoplifting losses 100,000
Employee discounts 80,000 Under the average cost approach, what is the
Normal shortage 130,000 estimated cost of ending inventory?
A. 1,500,000
What is the ending inventory at retail? B. 1,024,000
A. 2,720,000 C. 960,000
B. 2,800,000 D. 900,000
C. 2,880,000 5. Bouquet Company used the conventional retail
D. 2,920,000 inventory method to account for inventory
2. Carmela Company used the conservative retail
inventory method and provided the following Cost Retail
information relating to the inventory at year-end: Beginning inventory and
Cost Retail purchases 6,000,000 9,200,000
Beginning inventory 530,000 900,000 Net markup 400,000
Purchases 6,080,000 8,700,000 Net markdown 600,000
Purchase discounts 85,000 Sales 7,800,000
Freight in 105,000
Markup 600,000
What amount should be reported as cost of goods
sold?
Markdown 800,000
A. 4,800,000
Sales 8,600,000
B. 4,875, 000
Sales discounts 100,000 C. 5,200,000
What is the ending inventory at year-end? D. 5,250,000
A. 520,000 6. At the beginning of current year Cavalier Company
B. 258,000 reported inventory of P1,000,000 at retail and P560,000
C. 800,000 at cost.
D. 585,000
3. Sublime Company showed the following information at During the current year the entity registered the
year-end: following purchases:
Cost Retail Cost 4,000,000
Beginning inventory 280,000 700,000 Retail price 6,200,000
Sales 5,000,000 Original markup 2,200,000
Purchases 2,480,000 5,160,000
Freight in 75,000 The net sales totaled P5,400,000 the following
Markup 500,000 reductions were made in the retail price:
Markup cancellation 60,000
Markdown 250,000 To meet price competition 50,000
Markdown Cancellation 50,000 To dispose of overstock 30,000
Estimated normal shrinkage is 2% of sales. Miscellaneous reductions 120,000
The entity used the retail inventory method in During the current year the selling price of a certain
estimating the value of inventory. inventory increased from P200 to P300.
What is the estimated cost of ending inventory at This additional markup applied to 5,000 items but was
approximate lower of average cost and net realizable later canceled on the remaining 1,000 items
value?
A. 460,000 What is the ending inventory using the average cost
B. 450,000 approach in applying the retail method?
C. 495,000 A. 2,000,000
D. 506,000 B. 2,400,000
C. 1,240,000
D. 1,,200,000
 Retail Inventory Method– Multiple Choice Problems
7. Fainhearted Company provided the following
information for the current year:

Cost Retail
Beginning inventory 750,000 1,000,000
Purchase 4,150,000 5,800,000
Additional markup ________ 200,000
Available for sale 4,900,000 7,000,000

Sales for the year totaled P5,500,000. Markdown

amount to P100,000.

Under the average cost approach in applying the retail

method, what is the estimated cost of inventory?
A. 1,050,000
B. 1,400,000
C. 994,000
D. 980,000
8. Deadlock Company used the FIFO retail method of
inventory valuation. The following information is
available for the current year:

Cost Retail
Beginning inventory 600,000 1,500,000
Purchases 3,000,000 5,500,000
Net additional markup 500,000
Net markdown 1,000,000
Sales 4,500,000

What is the estimated cost of the ending inventory?

A. 1,200,000
B. 1,040,000
C. 1,000,000
D. 960,000
9. Emeritus Company which used the FIFO retail
inventory method provided the following information for
the current year:

Cost Retail
Beginning inventory 1,200,000 1,800,000
Purchases 5,600,000 7,200,000
Freight in 400,000
Net markup 1,400,000
Net markdown 600,000
Sales 7,600,000

What is the cost of goods sold for the current year?

A. 5,550,000
B. 5,594,000
C. 5,682,000
D. 4,350,000
10. Groom Company used the FIFO retail method of
inventory valuation. The entity provided the following
information for the current year:

Cost Retail
Beginning inventory 1,200,000 1,500,000
Net purchases 4,200,000 5,900,000
Net markup 200,000
Net markdown 100,000
Net sales 5,500,000

What is the estimated cost of ending inventory?

A. 1,400,000
B. 1,550,000
C. 1,440,000
D. 1,460,000