Question

Ann Co. uses the dollar-value LIFO retail method. The beginning inventory, purchased when the price index was 100, had a retail value of $4,000 and a cost of $3,600. During the period, purchases amounted to $60,000 at retail ($52,800 at cost). Sales amounted to $56,300. The year-end price index was 110. What is the cost of ending inventory?

Answer 1

• Required: Cost of ending inventory
  Answer = $ 6,504
• Working for above answer

	Cost	Retail	Cost to retail %
Beginning Inventory	$3,600	$4,000	90.000%
Net Purchases	$52,800	$60,000
Net Mark ups		$0
Net Mark downs		$0
Purchases	$52,800	$60,000	88.000%
Goods available for sale	$56,400	$64,000
Net Sales		($56,300)
Ending Inventory at Retail		$7,700 [goto Step 1 below now]
Ending Inventory at Cost	($6,504) [comeback after Step 3]
Cost of Goods Sold	$49,896

	Step 1	Step 2	Step 3
Ending Inventory at Year end retail prices	Ending Inventory at Year end BASE YEAR retail prices	Inventory Layer at base year retail prices	Inventory Layers converted to cost
$7,700	$7,000	$4,000	$3,600	[4000 x 90.0% x 1.0]
	[ 7700 / 1.1 ]	$3,000	$2,904	[3000 x 88.0% x 1.1]
Total ending Inventory at dollar value LIFO retail cost			$6,504	= ANSWER