# Shamrock Inc. — Conventional Retail Inventory Method (Dec 31, 2026) ## 1. **Extract and Organize Data** | Item | Cost | Retail | |--------------------------|-----------|-------------| | Beginning Inventory | 157,600 | 241,000 | | Purchases | 828,800 | 1,153,000 | | Purchase Returns | 48,800 | 86,600 | | Purchase Discounts | 11,600 | -- | | Freight-in | 37,900 | -- | | Gross Sales | -- | 1,229,000 | | Sales Returns | -- | 55,600 | | Markups | -- | 72,600 | | Markup Cancellations | -- | 15,300 | | Markdowns | -- | 88,300 | | Markdown Cancellations | -- | 24,400 | | Normal Breakage Loss | -- | 8,900 | ## 2. **Compute Goods Available for Sale** ### **At Cost** - Beginning Inventory: **157,600** - Purchases: **828,800** - **Less**: Purchase Returns: **(48,800)** - **Less**: Purchase Discounts: **(11,600)** - **Add**: Freight-in: **+37,900** **Total Cost = 157,600 + 828,800 - 48,800 - 11,600 + 37,900 = 964,900** ### **At Retail** - Beginning Inventory: **241,000** - Purchases: **1,153,000** - **Less**: Purchase Returns: **(86,600)** - **Add**: Markups: **+72,600** - **Less**: Markup Cancellations: **(15,300)** - **Less**: Markdowns: **(88,300)** - **Add**: Markdown Cancellations: **+24,400** **Subtotal before accounting for normal breakage loss:** $$ \begin{align*} \text{Initial Retail} &= 241,000 + 1,153,000 - 86,600 \\ &= 1,307,400 \\ \text{Add Markups} &= 1,307,400 + 72,600 - 15,300 \\ &= 1,364,700 \\ \text{Subtract Markdowns} &= 1,364,700 - 88,300 + 24,400 \\ &= 1,300,800 \\ \end{align*} $$ So, **Goods Available for Sale at Retail = 1,300,800** ## 3. **Calculate Net Sales** - Gross Sales: **1,229,000** - **Less**: Sales Returns: **(55,600)** - **Less**: Normal Breakage (treated as sales): **(8,900)** **Net Sales = 1,229,000 - 55,600 - 8,900 = 1,164,500** ## 4. **Calculate Ending Inventory at Retail** **Ending Inventory at Retail** = Goods Available at Retail − Net Sales = **1,300,800 − 1,164,500 = 136,300** ## 5. **Calculate Cost-to-Retail Ratio (Conventional Method)** **In Conventional Retail Method:** - **Ignore net markdowns** when computing the ratio (i.e., use markups but not markdowns). ### **Cost-to-Retail Ratio Calculation** - **Cost**: 964,900 - **Retail (excluding net markdowns):** - Start with: 241,000 + 1,153,000 - 86,600 = 1,307,400 - **Add net markups only**: +72,600 - 15,300 = +57,300 - **Total for ratio**: 1,307,400 + 57,300 = **1,364,700** **Ratio = Cost / Retail = 964,900 / 1,364,700 ≈ .707 (rounded to decimal places: 71%)** ## 6. **Compute Ending Inventory at Cost** **Ending Inventory at Cost = Ending Inventory at Retail × Cost-to-Retail Ratio** = 136,300 × .71 = **96,773** ## 7. **Final Summary Table** | Step | Amount | |------------------|--------------| | Ending Inventory at Retail | 136,300 | | Cost-to-Retail Ratio (rounded) | 71% | | **Ending Inventory at Cost** | **96,773** | --- ## **Summary** - **Conventional retail inventory method ending inventory (Dec 31, 2026):** - **At retail:** $136,300 - **At cost:** **$96,773** --- **Note:** - All ratios and answers rounded as per instructions. - Markdowns are excluded from the cost-to-retail ratio, per the conventional retail method. - Normal breakage is treated as sales. --- **If you need the worksheet/steps as a detailed list, let me know!**

# Summary of Steps for Shamrock Inc. Inventory Calculation ## Step 1: Extract and Organize Data The relevant data for Shamrock Inc. includes beginning inventory, purchases, returns, and sales transactions. This data is structured in a table for easy reference. ## Step 2: Compute Goods Available for Sale Total cost is calculated by adjusting beginning inventory and purchases for returns, discounts, and freight-in. The total retail value is determined by adjusting beginning inventory for purchases, returns, markups, and markdowns. ## Step 3: Calculate Net Sales Net sales are derived from gross sales by subtracting sales returns and normal breakage losses. This provides a clear view of actual sales revenue. ## Step 4: Calculate Ending Inventory at Retail Ending inventory at retail is computed by subtracting net sales from goods available for sale at retail. This reflects the inventory value remaining after sales. ## Step 5: Calculate Cost-to-Retail Ratio The cost-to-retail ratio is established by dividing the total cost by the total retail value, excluding markdowns. This ratio is crucial for determining the cost of ending inventory. ## Step 6: Compute Ending Inventory at Cost Ending inventory at cost is calculated by multiplying the ending inventory at retail by the cost-to-retail ratio. This provides the final valuation of inventory at cost. ## Step 7: Final Summary Table A summary table consolidates the key results, including ending inventory at retail, the cost-to-retail ratio, and the final ending inventory at cost. This provides a concise overview of the inventory valuation process.