Proforma Computation

Cost Retail Cost Ratio

Inventory Beginning 1,100,000.00 2,200,000.00 50%
Purchases 15,800,000.00 26,300,000.00
Freight-in 400,000.00
Purchase Returns - 600,000.00 - 1,000,000.00
Purchase Discount (XX)
Purchase Allowance - 300,000.00
Departmental Transfer IN 400,000.00 800,000.00
Net Markup 600,000.00
Net Markdown - 900,000.00
Goods Available for Sale - Average 16,800,000.00 28,000,000.00 60%
Less
Sales 24,700,000.00
Sales Returns - 350,000.00
Sales Discount and Allowances (disregard) ----
Employee Discount 600,000.00
Normal Loss 50,000.00
Total (deducted from Goods Available for Sale) 25,000,000.00
Ending Inventory at Retail 3,000,000.00
Less Physical Count of Inventory 1,700,000.00
Inventory Shortage at Retail 1,300,000.00
Cost Ratio 60%
Inventory Shortage at Cost 780,000.00

Inventory Shortage at Cost (3M - 1.7M) X 60% 780,000.00

Cost of Ending Inventory

Average = Invty @ Retail X Cost Ratio @ Average 1,800,000.00

Cost of Sales = GAS @cost - Invty @cost - Abnormal shrinkage @cost

Sales 100% 2,000,000.00

Sales to Employee 70% 1,400,000.00
Employee Discount 30% 600,000.00

14-14 Ross Company

Proforma Computation
Cost Retail Cost Ratio
Inventory Beginning 1,650,000.00 2,000,000.00
Net Purchases 4,200,000.00 6,400,000.00 If FIFO
Net Markup 800,000.00 Method 60%
Net Markdown - 200,000.00 cost ratio
Goods Available for Sale - Average 5,850,000.00 9,000,000.00 65%
Less
 Net Sales 6,000,000.00
Ending Inventory at Retail 3,000,000.00
Average Cost Rate 65%
Average Cost of Ending Inventory 1,950,000.00

Cost of Goods Sold (5,850,000 - 1,950,000) 3,900,000.00

Using FIFO
Cost Retail
Inventory Beginning 1,650,000.00 2,000,000.00
Net Purchases 4,200,000.00 6,400,000.00
Net Markup 800,000.00
Net Markdown - 200,000.00
Net Purchases - FIFO 4,200,000.00 7,000,000.00 60%
Goods Available for sale 5,850,000.00 9,000,000.00

14-11 Bizarre Company

For Manufacturing Business
Purchases, Purchase Returns, allowances, discount and Freight-in are not reflected in computation table.
- because these items are only related to materials inventory.

Purchases is replaced by the cost of goods manufactured

Inventory account to be used is the Finished Goods Inventory

Cost of Goods Manufactured will be computed separately using the cost of goods sold computation for the manufa

Cost Retail Cost Ratio

Finished Goods Beginning 144,000.00 240,000.00
Cost of Goods Manufactured 1,200,000.00 2,000,000.00 60%
Goods Available for Sale 1,344,000.00 2,240,000.00
Less
Sales 840,000.00 1,400,000.00
Ending Inventory at Retail 504,000.00 840,000.00
Average Cost Ratio
mputation table.

mputation for the manufacturing business

Inventory Stock Card
Received - Supplier Issued - Customer Balance
Date Qty Unit Cost Amount Qty Unit Cost Amount Qty Unit Cost
Jan-10 1,000.00 870.00 870,000.00
Jan-15 2,000.00 872.50 1,745,000.00
Jan-17 - 500.00 872.50 - 436,250.00

Jan-10 Purchase 1,000 units of merchandise with a list price of P1,000,000 and terms 5% and 10% TD, 2/10, n/30.
In addition the company also incurred on this purchases a freight charges of P15,000.

Invoice Price (1,000,000 X 95% X 90%) 855,000.00 1,000.00

Freight-in 15,000.00
Total Cost of purchases 870,000.00
Divide by qty purchased 1,000.00
Unit Cost presented in the stock cards 870.00

Jan-15 The company bought 2,000 units merchandise for P860 per unit. Freight related to this purchases is P25,000.

Total Purchase price (P860 X 2,000) 1,720,000.00

Freight-in 25,000.00
Total Cost 1,745,000.00
Qty 2,000.00
Unit Cost 872.50

Jan 17. The company returned 500 units of goods to supplier that were acquired on Jan 15.
Balance
Amount

10% TD, 2/10, n/30.

855.00

s purchases is P25,000.

Returns to supplier are reflected as negative to received. Purchase Returns

Returns from customer are reflected as negative to issued. Sales Returns