Kiddie World uses a periodic Inventory system and the retall 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 Cost $ 460,000 940,000 52,700 Retail $ 590,000 1,370,000 64,000 Net markdowns Net sales 34,000 1,280,000 Estimate ending Inventory and cost of goods sold (average cost). Note: Round ratio calculation to 2 decimal places (I.e., 0.1234 should be entered as 12.34%.) Beginning inventory Plus: Net purchases Freight-in Net markups Less: Net markdowns Goods available for sale Cost-to-retail percentage Less: Net sales Estimated ending inventory at retail Estimated ending inventory at cost Estimated cost of goods sold Cost Retail Cost-to-Retail Ratio $ 480.000 S 940,000 590,000 1,370,000 52,700 64,000 (34.000) 1,452,700 1,990,000 $ (1,280,000) 710.000

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…