Question
In: Accounting
Dollar-Value LIFO Retail Johns Company adopts the dollar-value LIFO retail inventory method on January 1, 2016....
Dollar-Value LIFO Retail
Johns Company adopts the dollar-value LIFO retail inventory method on January 1, 2016. The following information for 2016 is obtained from Johns' records:
| Cost | Retail | |
|---|---|---|
| Inventory, January 1, 2016 | $20,000 | $29,000 |
| Purchases | 60,000 | 92,000 |
| Net additional markups | — | 1,000 |
| Net markdowns | — | 3,000 |
| Sales | — | 75,000 |
The price index on January 1, 2016, was 100, and on December 31, 2016, it was 110.
Required:
Compute the cost of the inventory on December 31, 2016. Round the cost-to-retail ratio to three decimal places.
| JOHNS COMPANY | ||
| Calculation of cost of inventory using Dollar-Value LIFO | ||
| December 31, 2016 | ||
| Cost | Retail | |
| Beginning inventory | $20,000 | $29,000 |
| Purchases | 60,000 | $92,000 |
| Add: Markups (net) | 1,000 | |
| Less: Markdowns (net) | (3000) | |
| $90,000 | ||
| Goods available for sale | $80,000 | $119,000 |
| Less: Sales | 75,000 | |
| Ending inventory at retail | $44,000 | |
| Ending inventory at cost | $ ? | |
Solutions
Expert Solution
- Complete answer
|
OHNS COMPANY |
||
|
Calculation of cost of inventory using Dollar-Value LIFO |
||
|
December 31, 2016 |
||
|
Cost |
Retail |
|
|
Beginning inventory |
$20,000 |
$29,000 |
|
Purchases |
60,000 |
$92,000 |
|
Add: Markups (net) |
1,000 |
|
|
Less: Markdowns (net) |
(3000) |
|
|
$90,000 |
||
|
Goods available for sale |
$80,000 |
$119,000 |
|
Less: Sales |
75,000 |
|
|
Ending inventory at retail |
$44,000 |
|
|
Ending inventory at cost |
$ 28,067 [see Step 3 below] |
|
- Workings
|
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 |
|
|
$44,000 [correctly calculated by you above] |
$40,000 |
$29,000 |
$20,000 |
[29000 x 1.00 x 68.966%] |
|
[ 44000 / 1.1 ] |
$11,000 |
$8,067 |
[11000 x 1.10 x 66.667%] |
|
|
Total ending Inventory at dollar value LIFO retail cost |
$28,067 |
|||
--Cost to Retail %
|
Cost |
Retail |
Cost to retail % |
|
|
Beginning Inventory |
$20,000 |
$29,000 |
68.966% |
|
Net Purchases |
$60,000 |
$92,000 |
|
|
Net Mark ups |
$1,000 |
||
|
Net Mark downs |
($3,000) |
||
|
Purchases |
$60,000 |
$90,000 |
66.667% |
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