Problem -

Presented below is information related to Larkspur Company.

Cost Retail

Beginning inventory $ 53,710 $107,600

Purchases (net) 128,270 189,900

Net markups 10,147

Net markdowns 24,575

Sales revenue 197,550

Compute the ending inventory at retail.

Compute a cost-to-retail percentage under the following conditions. (Round ratios to 2 decimal places, e.g. 78.74%)

(1) Excluding both markups and markdowns. %

(2) Excluding markups but including markdowns. %

(3) Excluding markdowns but including markups %

(4) Including both markdowns and markups. %

Which of the methods in (b) above does the following?

Question: (1) Provides the most conservative estimate of ending inventory.

Excluding Both Markups and Markdowns.

Excluding Markdowns but Including Markups

Excluding Markups but Including Markdowns

Including Both Markdowns and Markups

Question: (2) Provides an approximation of lower-of-cost-or-market.

Excluding Both Markups and Markdowns.

Excluding Markdowns but Including Markups

Excluding Markups but Including Markdowns

Including Both Markdowns and Markups

Question: (3) Is used in the conventional retail method.

Excluding Both Markups and Markdowns.

Excluding Markdowns but Including Markups

Excluding Markups but Including Markdowns

Including Both Markdowns and Markups

Compute ending inventory at lower-of-cost-or-market.

Compute cost of goods sold based on (d).

 Compute gross margin based on (d).