Retail inventory method

The retail inventory method estimates inventory cost from linked cost and retail records. It begins with goods available at cost and retail, derives ending inventory at retail from controlled movements, and applies the ratio required by the declared method variant.

In a bounded average-cost illustration, divide goods available at cost by goods available at retail. Subtract net sales from the retail amount to obtain ending inventory at retail. Multiply that ending retail balance by the cost-to-retail ratio. Reconcile sales plus ending retail inventory to goods available at retail.

A full retail ledger can include original markups, markup cancellations, markdowns, markdown cancellations, employee discounts, returns, transfers, and shrinkage. Average-cost and conventional variants can treat these amounts differently. Name the variant before building the denominator. Do not silently move a markdown or cancellation to make the ratio work. Keep department or pool boundaries stable.

ASC 330-10-30-13 says a reversed-markup procedure such as the retail inventory method can be practical and appropriate in some situations. ASC 330-10-35-1A routes retail-method inventory to the retained subsequent-measurement path. Paragraph 35-7 explains that adequate current markdowns can help the retail method meet that objective.

The Cedar example shows a bounded average-cost pool. The Northstar task uses independent amounts and requires the missing-evidence review.