Kiddie World uses a periodic inventory system and the retail inventory method to estimate ending inventory and cost of goods sold. The following data are available at the end of the year: Beginning inventory Net purchases Freight-in Net markups Net markdowns Net sales Beginning inventory Plus: Net purchases Freight-in Net markups Less: Net markdowns Cost $ 490,000 955,000 10,500 Estimate ending inventory and cost of goods sold (LIFO). Note: Round ratio calculation to 2 decimal places (i.e., 0.1234 should be entered as 12.34%.) Goods available for sale (excluding beginning Inventory) Goods available for sale (including beginning Inventory) Cost-to-retail percentage Less: Net sales Estimated ending inventory at retail Estimated ending inventory at cost Estimated cost of goods sold Retail $ 620,000 1,400,000 67,000 37,000 1,295,000 $ Cost 490,000 $ 955,000 10,500 965,500 1,455,500 $ Retail 620,000 1,400,000 67,000 (37,000) 1,430,000 2,050,000 (1,295,000) 755,000 Cost-to-Retail Ratio 67.52%

Before discussing the topic inventory valuation let’s discuss the meaning of inventory. In accounting, inventory is also known as stock. Inventory means all the finished goods, materials, merchandise that a business holds for the purpose of selling it in…