A. Increases the cost-retail ratio Answer: D. Decreases the cost-retail ratio f.g.PROBLEMSh.1.On April 1, 2015,ICompany issued 30,000 shares for a parcel of land. Par value and marketvalue of ordinary shares 40 and 55 respectively. The fair market value of the building is1,600,000. Get answer to your question and much more 2.LCompany is engaged in raising dairy livestock. The entity provided the following informationduring the year:j.k.Carrying amount on January 13,000,000l.Gain arising from change in fair value due to price change500,000m.Gain arising from change in fair value due to phyical change400,000n.Decrease due to sales900,000o.p.What amount should be reported as biological asset on December 31?a.3,000,000b.3,500,000c.4,800,000d.3,900,000q. 3.On December 31, 2015, a storm surge damaged the warehouse ofOCompany. The entireinventory and many accounting records wre completely destroyed4.5.Jan 1Dec 316.Purchases6,500,0007.Inventory2,000,0008.Cash Sales800,0009.Collections of accounts receivable7,500,00010.Accounts receivable600,0001,200,00011.Gross profit rate30%12.13.What is the inventory loss from the storm surge? Get answer to your question and much more Companies have used the retail method of inventory accounting for many years. According to the Committee on Ways and Means, the retail inventory method has been the best accounting method since 1941. Professor N.P. McNair wrote the first major book detailing the pros of using this method. While some have begun to question the usefulness of this method in recent years, due to advances in tracking costs and inventory, as Smyth Retail points out, it's still used with efficiency by many businesses today. Basics of the Retail MethodThe retail inventory method is one of only two methods accepted for tax reporting purposes and accepted by the American Institute of CPAs under the Generally Accepted Accounting Principles. The direct cost method comprises the other accepted method. RIM also stands as the most widely used method by merchandising companies to calculate inventory values. According to California State University Northridge, the retail method is especially useful for quarterly financial statements. It is based on the relationship between the merchant's cost and the retail prices of inventory. Additional factors, like mark-ups and mark-downs, as well as employee discounts must be factored into the calculations. However, before you can do that, you need to understand the basics of the retail method. The Cost/Retail RatioThe cost/retail ratio makes up one of the main components used to calculate the retail inventory method. Two methods exist for calculating the cost/retail ratio. The first method, called the conventional retail method includes markups but excludes markdowns. This method results in a lower ending inventory value. The second method, simply called the retail method, uses both markups and markdowns to calculate the ratio. This method results in a higher-ending inventory value. Retail Inventory Method FormulaWhen using the conventional retail inventory method for inventory costing, the following data inputs create the cost/retail ratio formula: beginning inventory at cost and retail, purchases at cost and retail plus the retail value of any markups:
The product of this calculation equals the cost/retail ratio. For example beginning inventory values are $10,000 at cost and 20,000 at retail, purchases total $40,000 at cost and $80,000 at retail and markups totaled $6,000 at retail. $10,000 + $40,000 = $50,000 total value at cost. $20,000 + $80,000 + $6,000 = $106,000 total value at retail. $50,000 / $106,000 = 0.472 for a cost/retail ratio of 47 percent. The Retail Method In ActionOnce the cost/retail ratio gets determined the small business owner uses that ratio to value his period-end inventory. Using the $50,000 total inventory value at cost and the $106,000 total inventory value at retail, the owner now subtracts all sales and any markdowns from the total inventory value at retail. This gives the owner a total ending inventory value at retail selling price. To determine the total ending inventory value at cost, the owner multiplies the ending inventory value at retail selling price times the cost/retail ratio. For example, if sales total $75,000 and markdowns totaled $9,000 he subtracts these numbers from the $106,000 leaving $22,000 in ending inventory value at retail. He then multiplies the $22,000 times the cost/retail ratio of 47 percent and gets an ending inventory value at cost of $10,340 ($22,000 x 0.47 = $10,340.) Because the retail inventory method uses weighted averages to calculate the ending values it does not represent an exact cost value of the inventory. Also, because it uses markdowns, this method gives the most conservative value for inventory valuation. In practice, the retail inventory method, with markups and markdowns, can become complicated to figure out, so it's best to track these using a database or, at the very least, a spreadsheet. What is the effect of net markups on the cost retail?(2) Net markups do not impact the cost and include markups less markup cancellations.
What is the effect of net markups on the cost retail ratio when using conventional retail approach?What is the effect of net markups on the cost-retail ratio when using the conventional retail method? No effect on the cost-to-retail ratio.
When the conventional retail method includes both net markups and net markdowns in the costWhen the conventional retail method includes both net markups and net markdowns in the cost-to-retail ratio, it approximates a lower-of-cost-or-market valuation. 16. In the retail inventory method, the term markup means a markup on the original cost of an inventory item.
What is the difference between the average cost retail inventory method and the conventional retail inventory method?The Cost/Retail Ratio
The first method, called the conventional retail method includes markups but excludes markdowns. This method results in a lower ending inventory value. The second method, simply called the retail method, uses both markups and markdowns to calculate the ratio.
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What is the effect of net markups on the cost-retail ratio when using the conservative retail method
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