Required information [The following information applies to the questions displayed below.] On January 1, 2024, Pet Friendly Stores adopted the retail inventory method. Inventory transactions at both cost and retail, and cost indexes for 2024 and 2025 are as follows: Beginning inventory Purchases Purchase returns. Freight-in Net markups Net markdowns Net sales to customers Sales to employees (net of 25% discount) Normal spoilage Price Index: January 1, 2024 December 31, 2024 December 31, 2025 Estimated ending inventory at retail Estimated ending inventory at cost Estimated cost of goods sold 2024 Average Cost Retail Method Cost Retail $ 108,500 $ 175,000 520,000 805,000 5,000 3,200 4,500 1.00 1.10 1.23 6,150 4,150 670,000 22,500 2,000 Cost $ 635,000 2,700 6,000 2025 Retail $ 800,000 4,425 8,800 6,500 Required: 2. Estimate the 2024 ending inventory and cost of goods sold using the average cost retail method. Note: Round your cost-to-retail percentage to 2 decimal places and round your final answers to nearest whole dollar. 692,000 22,500 5,400

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…