Neer Department Store uses the retail inventory method to estimate its monthly ending inventories.The following information is available for two of its departments at August 31, 2008.
| Sporting Goods | Jewellery and Cosmetics | |||
| Cost | Retail | Cost | Retail | |
| Net sales | 1,078,300 | 1,156,300 | ||
| Purchases | 672,800 | 1,124,700 | 757,700 | 1,153,500 |
| Purchase returns | (26,120) | (40,630) | (11,670) | (19,620) |
| Purchase discounts | (12,150) | – | (2,220) | – |
| Freight-in | 10,000 | – | 15,580 | – |
| Beginning inventory | 45,120 | 72,830 | 37,550 | 61,310 |
At December 31, Neer Department Store takes a physical inventory at retail. The actual retail values of the inventories in each department are Sporting Goods $94,350, and Jewelry and Cosmetics $43,760.
a. Determine the estimated cost of the ending inventory for each department on August 31, 2008, using the retail inventory method. (Round cost-to-retail ratio to 2 decimal places , e.g. 10.50 in computations. Round final answers to 0 decimal places, e.g. 125.)
b. Compute the ending inventory at cost for each department at December 31, assuming the cost-to-retail ratios are 60% for Sporting Goods and 63% for Jewelry and Cosmetics.
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