In: Accounting
On January 1, 2018, HGC Camera Store adopted the dollar-value LIFO retail inventory method. Inventory transactions at both cost and retail, and cost indexes for 2018 and 2019 are as follows: 2018 2019 Cost Retail Cost Retail Beginning inventory $ 42,000 $ 60,000 Net purchases 94,500 118,000 $ 108,108 $ 133,200 Freight-in 3,000 3,500 Net markups 15,000 10,000 Net markdowns 3,000 3,200 Net sales to customers 117,360 119,890 Sales to employees (net of 10% discount) 3,600 6,300 Price Index: January 1, 2018 1.00 December 31, 2018 1.04 December 31, 2019 1.09
Ans:
2018:
Particulars |
||||||
Cost |
Retail |
|||||
Beginning inventory |
$42,000 |
$ 60,000 |
||||
Plus: Net purchases |
94,500 |
118,000 |
||||
Freight-in |
3,000 |
|||||
Net markups |
15,000 |
|||||
Less: Net markdowns |
______ |
(3,000) |
||||
Goods available for sale (excluding beginning inventory) |
97,500 |
130,000 |
||||
Goods available for sale (including beginning inventory) |
139,500 |
190,000 |
||||
$ 97,500 Cost-to-retail percentage: = 75% $130,000 |
||||||
Less: Net sales ($117,360 + 3,600) Employee discounts(Note:1) |
(120,960) (400) |
|||||
Estimated ending inventory at current year retail prices |
$ 68,640 |
|||||
Estimated ending inventory at cost (below) |
(46,680) |
|||||
Estimated cost of goods sold |
$92,820 |
|||||
___________________________________________________________________________ Step 1 Step 2 Step 3 Ending Ending Inventory Inventory Inventory Inventory Layers Layers at Year-end at Base Year at Base Year Converted to Retail Prices Retail Prices Retail Prices Cost $68,640 $68,640 = $66,000 $60,000 (base) x 1.00 x 70% = $42,000 (above) 1.04 6,000 (2018) x 1.04 x 75% = 4,680 Total ending inventory at dollar-value LIFO retail cost ............ $46,680 Note:Employee discounts must be deducted in the retail column. $3,600 = $4,000 – 3,600 = $400 = Employee discounts |
||||||
0.90 |
2019:
Particulars
Cost |
Retail |
|||||
Beginning inventory |
$46,680 |
$ 68,640 |
||||
Plus: Net purchases |
108,108 |
133,200 |
||||
Freight-in |
3,500 |
|||||
Net markups |
10,000 |
|||||
Less: Net markdowns |
______ |
(3,200) |
||||
Goods available for sale (excluding beginning inventory) |
111,608 |
140,000 |
||||
Goods available for sale (including beginning inventory) |
158,288 |
208,640 |
||||
$ 111,608 Cost-to-retail percentage: = 79.72% $140,000 |
||||||
Less: Net sales ($119,890 + 6,300) Employee discounts(note) |
(126,190) (700) |
|||||
Estimated ending inventory at current year retail prices |
$ 81,750 |
|||||
Estimated ending inventory at cost (below) |
(54,501) |
|||||
Estimated cost of goods sold |
$103,787 |
|||||
___________________________________________________________________________ Step 1 Step 2 Step 3 Ending Ending Inventory Inventory Inventory Inventory Layers Layers at Year-end at Base Year at Base Year Converted to Retail Prices Retail Prices Retail Prices Cost $81,750 $81,750 = $75,000 $60,000 (base) x 1.00 x 70% = $42,000 (above) 1.09 6,000 (2018) x 1.04 x 75% = 4,680 9,000 (2019) x 1.09 x 79.72% = 7,821 Total ending inventory at dollar-value LIFO retail cost ............ $54,501 |
Note: Employee discounts must be deducted in the retail column.
$6,300
= $7,000 – 6,300 = $700 = Employee discounts
.90