CHAPTER 14

PROBLEM 14-1

COST RETAIL
Beginning inventory 280,000 700,000
Net purchases 2,555,000 5,160,000
Markup 500,000
Markup cancellation (60,000)
GAS- conservative 2,835,000 6,300,000
Cost ratio (2,835,000/ 6,300,000) 45%
Markdown (250,000)
Markdown cancelation 50,000
GAS- average 2,835,000 6,100,000
Cost ratio (2,835,000/ 6,100,000) 47%
Less: Sales 5,000,000
Shrinkage (5,000,000 x 2%) 100,000 5,100,000
Ending inventory at retail 1,000,000

Conservative cost (1,000,000 x 45%) 450,000

Answer: B

PROBLEM 14-2

COST RETAIL
Beginning inventory 700,000 1,000,000
Purchases 4,100,000 6,300,000
Markup 700,000
GAS- conservative 4,800,000 8,000,000
Cost ratio (4,800,000/ 8,000,000) 60%
Markdown (500,000)
GAS- average 4,800,000 7,500,000
Cost ratio (4,800,000/ 7,500,000) 64%
Less: Sales 5,900,000
Shoplifting losses 100,000 6,000,000
Ending inventory at retail 1,500,000

Average cost (1,500,000 x 64%) 960,000

Answer: C
 PROBLEM 14-3

COST RETAIL
6,000,00
Beginning inventory & purchases 0 9,200,000
Net markup 400,000
6,000,00
GAS-conservative 0 9,600,000
Cost ratio (6,000,000/ 9,600,000) 62.5%
Markdown (600,000)
6,000,00
GAS- average 0 9,000,000
Cost ratio (6,000,000/ 9,000,000) 67%
(7,800,000
Sales )
Ending inventory at retail 1,200,000

Conservative cost (1,200,000 x 62.5%) 750,000

Cost of Goods Sold

Goods available for sale 6,000,000
Ending inventory (750,000)
Cost of Goods Sold 5,250,000

Answer: D
 PROBLEM 14-4

COST RETAIL
Beginning inventory 560,000 1,000,000
4,000,00
Purchases 0 6,200,000
Markup 2,200,000
Additional markup 1,500,000
Markup cancelation (300,000)
4,560,00 10,600,00
GAS- conservative 0 0
Cost ratio (4,560,000/ 10,600,000) 43%
4,560,00 10,600,00
GAS- average 0 0
Cost ratio (4,560,000/ 10,600,000) 43%
5,400,00
Less: Sales 0
Price competition 50,000
Dispose of overstock 30,000
Miscellaneous reductions 120,000 5,600,000
Ending inventory at retail 5,000,000

Average (5,000,000 x 43%) 2,400,000

Answer: B

PROBLEM 14-5

COST RETAIL
1,000,00
Beginning inventory 750,000 0
4,150,00 5,800,00
Purchases 0 0
Additional markup 200,000
4,900,00 7,000,00
GAS- conservative 0 0
Cost ratio (4,900,000/
7,000,000) 70%
(100,000
Markdown )
GAS- average 4,900,00 6,900,00
 0 0
Cost ratio (4,900,000/
6,900,000) 71%
5,500,00
Less: Sales 0
1,400,00
Ending inventory at retail 0

Average (1,400,000 x 71%) 994,000

Answer: C

PROBLEM 14-6

COST RETAIL
1,650,00 2,200,00
Beginning inventory 0 0
3,725,00 4,950,00
Net purchases 0 0
(200,000 (300,000
Department transfer- credit ) )
Net markup 150,000
5,175,00 7,000,00
GAS- conservative 0 0
Cost ratio (5,175,000/
7,000,000) 74%
(500,000
Markdown )
5,175,00 6,500,00
GAS- average 0 0
Cost ratio (5,175,000/
6,500,000) 80%
3,500,00
Less: Sales 0
(100,000
Inventory shortage )
3,600,00
Employee discounts 200,000 0
2,900,00
Ending inventory at retail 0

2,250,00
Average (2,900,000 x 80%) 0
Answer: D

PROBLEM 14-7

COST RETAIL
Beginning inventory 650,000 1,200,000
9,000,00 14,700,00
Purchases 0 0
Freight in 200,000
(300,000
Purchase returns ) (500,000)
(150,000
Purchase allowances )
Departmental transfer in 200,000 300,000
Net markup 300,000
9,600,00 16,000,00
GAS- conservative 0 0
Cost ratio (9,600,000/ 16,000,000) 60%
(1,000,000
Net markdown )
GAS- average 9,600,00 15,000,00
 0 0
Cost ratio (9,600,000/ 15,000,000) 64%
9,500,00
Less: Sales 0
(100,000
Sales discounts )
Employee discounts 500,000
Normal shoplifting losses 600,000
10,900,00
Normal shrinkage 400,000 0
Ending inventory at retail 4,100,000

1. Conservative (4,100,000 x 60%) 2,460,000

Answer: B

2. Average (4,100,000 x 64%) 2,624,000

Answer: B

PROBLEM 14-8

COST RETAIL
Beginning inventory 500,000 770,000
3,070,00 4,300,00
Purchases 0 0
Transportation in 70,000
Purchase discount (45,000)
Purchase returns (25,000) (40,000)
Markup 100,000
Cancelation of markup (30,000)
 3,570,00 5,100,00
GAS- lower of average 0 0
Cost ratio (3,570,000/ 5,100,000) 70%
Markdown (350,000)
Cancelation on markdown 10,000
3,570,00 4,760,00
GAS- average 0 0
Cost ratio (3,570,000/ 4,760,000) 75%
4,000,00
Less: Sales 0
Sales return (80,000)
3,900,00
Sales discount (20,000) 0
Ending inventory at retail 860,000

1. Lower average (860,000 x 70%) 602,000

Answer: 602,000

2. Average (860,000 x 75%) 645,000

Answer: 645,000

PROBLEM 14-9

COST RETAIL
Beginning inventory 340,000 640,000
4,500,00 7,300,00
Purchases 0 0
Freight in 100,000
 (150,000 (250,00)
Purchase return ) 0
Purchase allowance (90,000)
Departmental transfer in 100,000 160,000
Net markup 150,000
4,800,00 8,000,00
GAS- conservative 0 0
Cost ratio (4,800,000/
8,000,000) 60%
(500,000
Net markdown )
4,800,00 7,500,00
GAS- average 0 0
Cost ratio (4,800,000/
7,500,000) 64%
6,600,00
Less: Sales 0
Sales allowance (50,000)
Employee discount 100,000
6,850,00
Spoilage and breakage 200,000 0
Ending inventory at retail 650,000

1. Conservative (650,000 x 60%) 390,000

Answer: 390,000

2. Average (650,000 x 64%) 416,000

Answer: 416,000

PROBLEM 14-10
2. Cost of Goods 1,200,00
Manufactured 0
Add: Finished Goods, Jan. 1 240,000
1,440,00
Goods available for sale 0
Less: Finished Goods, Dec. 31 840,000
Cost of Goods Sold 600,000

Answer: D

PROBLEM 14-11
 4,200,00
1. Net purchases at cost 0
Divide by cost ratio 60%
7,000,00
Total 0
Less: Net markup 800,000
6,200,00
Total 0
Add: Net markdown 200,000
6,400,00
Net purchases at retail 0

Answer: D

1,950,00
2. Cost of ending inventory 0
Divide by cost ratio 60%
3,250,00
Ending inventory at retail 0

9,000,00
Goods available for sale (retail) 0
3,250,00
Less: Ending inventory at retail 0
5,750,00
Net Sales 0

Answer: 5,750,000

5,850,00
3. Goods available for sale (cost) 0
1,950,00
Less: Cost of ending inventory 0
3,900,00
Cost of Goods Sold 0

Answer: A
 PROBLEM 14-12

2020
COST RETAIL
Beginning inventory 556,800 928,000
4,576,00 7,028,00
Purchases 0 0
Net markup 42,000
Net markdown (30,000)
4,576,00 7,040,00
Net purchases 0 0
Current year cost ratio
(4,576,000/ 7,040,000) 65%
5,132,80 7,968,00
Goods available for sale 0 0
6,840,00
Less: Net sales 0
1,128,00
Ending inventory at retail 0

FIFO cost (1,128,000 x

65%) 733,200

2021
COST RETAIL
1,128,00
Beginning inventory 733,200 0
4,760,00 6,812,00
Purchases 0 0
Net markup 56,000
Net markdown (68,000)
4,760,00 6,800,00
Net purchases 0 0
Current year cost ratio
(4,760,000/ 6,800,000) 70%
Goods available for sale 5,493,20 7,928,00
 0 0
6,928,00
Less: Net sales 0
1,000,00
Ending inventory at retail 0

FIFO cost (1,000,000 x

70%) 700,000

PROBLEM 14-13

2020
COST RETAIL
Beginning inventory 420,000 600,000
5,011,20 6,890,00
Purchases 0 0
Net markup 160,000
Net markdown (90,000)
5,011,20 6,960,00
Net purchases 0 0
Cost ratio
(5,011,200/ 6,960,000) 72%
5,431,20 7,560,00
Goods available for sale 0 0
6,839,00
Less: Net sales 0
Ending inventory at retail 721,000

FIFO cost (721,000 x 72%) 519,120

2021
COST RETAIL
Beginning inventory 519,120 721,000
Purchases 4,970,00 7,110,00
 0 0
Net markup 100,000
(110,000
Net markdown )
4,970,00 7,100,00
Net purchases 0 0
Cost ratio
(4,970,000/ 7,100,000) 70%
5,549,12 7,821,00
Goods available for sale 0 0
7,033,00
Less: Net sales 0
Ending inventory at retail 788,000

FIFO cost (788,000 x 70%) 551,600