Shoes-A-Lot Ltd Required:
Determine the December 31, 2005 Inventory Cost Under the Its

Essay

Shoes-A-Lot Ltd. decided to adopt the retail method to value its inventory. The following information is found for 2005: $\begin{array}{|l|l|l|}\hline & \text { Cost } & \text { Retail } \\\hline \text { Merchandise Inventory, January 1,2005 } & \$ 5,500 & \$ 20,000 \\\hline \text { Purchases } & 82,500 & 125,000 \\\hline \text { Purchase returns } & 3,000 & 4,200 \\\hline \text { Freight-In } & 5,000 & \\\hline \text { Net Additional Mark-ups } & & 11,742 \\\hline \text { Net Markdowns } & & 2,542 \\\hline \text { Net Sales } & & 120,000 \\\hline\end{array}$
Required:
Determine the December 31, 2005 inventory cost under the retail method-average cost basis.