Question

Blue Department Store converted from the conventional retail method to the LIFO retail method on January 1, 2020, and is now considering converting to the dollar-value LIFO inventory method. During your examination of the financial statements for the year ended December 31, 2021, management requested that you furnish a summary showing certain computations of inventory cost for the past 3 years.

Here is the available information.

1.		The inventory at January 1, 2019, had a retail value of $55,800 and cost of $30,400 based on the conventional retail method.
2.		Transactions during 2019 were as follows.

		Cost		Retail
Purchases		$346,890		$562,800
Purchase returns		5,100		10,000
Purchase discounts		5,900
Gross sales revenue (after employee discounts)				557,800
Sales returns				9,000
Employee discounts				3,100
Freight-in		17,400
Net markups				20,400
Net markdowns				11,800

3.		The retail value of the December 31, 2020, inventory was $74,700, the cost ratio for 2020 under the LIFO retail method was 66%, and the regional price index was 106% of the January 1, 2020, price level.
4.		The retail value of the December 31, 2021, inventory was $63,400, the cost ratio for 2021 under the LIFO retail method was 65%, and the regional price index was 109% of the January 1, 2020, price level.

Compute the cost of inventory on hand at December 31, 2019, based on the conventional retail method. (Round ratios for computational purposes to 0 decimal places, e.g. 78% and final answer to 0 decimal places, e.g. 28,987)

Cost of inventory on hand

$

  

  

Compute the inventory to be reported on December 31, 2019, in accordance with procedures necessary to convert from the conventional retail method to the LIFO retail method beginning January 1, 2020. Assume that the retail value of the December 31, 2019, inventory was $60,900. (Round ratios for computational purposes to 2 decimal places, e.g. 78.72% and final answer to 0 decimal places, e.g. 28,987.)

The inventory to be reported on December 31, 2011

$

  

  

Without prejudice to your solution to part (b), assume that you computed the December 31, 2019, inventory (retail value $60,900) under the LIFO retail method at a cost of $36,845. Compute the cost of the store’s 2020 and 2021 year-end inventories under the dollar-value LIFO method. (Round ratios for computational purposes to 2 decimal places, e.g. 78.72% and final answer to 0 decimal places, e.g. 28,987.)

		2020		2021
Inventories under the dollar-value LIFO method		$		$

Answer 1