Chapter 9: Elements & Treatments in Retail Method

Question 1

Element

Abnormal shortages (spoilage, breakage, theft)

Answer 1

Treatment

Deducted in both cost and retail columns, before calculating the cost-to-retail percentage

Question 2

Element

Employee discounts (if sales recorded net of discounts)

Answer 2

Treatment

Added to net sales, after calculating the cost-to-retail percentage

Question 3

Element

Freight-in (Shipping & Insurance)

Answer 3

Treatment

Added to cost column, before calculating the cost-to-retail percentage

Question 4

Element

Purchase returns

Answer 4

Treatment

Deducted in both cost and retail columns, before calculating the cost-to-retail percentage

Question 5

Element

Purchase discounts taken (if gross method used to record purchases)

Answer 5

Treatment

Deducted in cost column, before calculating the cost-to-retail percentage

Question 6

Element

Normal shortages (spoilage, breakage)

Answer 6

Treatment

Deducted in retail column, after calculating the cost-to-retail percentage