Question

Smith-Kline Company maintains inventory records at selling prices as well as at cost. For 2018, the records indicate the following data.

($ in 000s)

Cost Retail

Beginning Inventory $112 $160

Purchases $812 $1067

Freight- in on purch. 37

Purchase returns 1 3

Net markups 5

Net markdowns 9

net sales 923

Required: Assuming the price level increased from 1 at January 1 to 1.45 at December 31, 2018, use the dollar-value LIFO retail method to approximate cost of ending inventory (at retail and cost) and costs of goods sold.

Answer 1

Ending Inventory at Retail	$297
Ending Inventory at Cost	$164
Cost of Goods Sold	$796

• Workings

	Cost	Retail	Cost to retail %
Beginning Inventory	$112	$160	70.000%
Net Purchases	$811	$1,064
Freight In	$37
Net Mark ups		$5
Net Mark downs		($9)
Purchases	$848	$1,060	80.000%
Goods available for sale	$960	$1,220
Net Sales		($923)
Ending Inventory at Retail		$297
Ending Inventory at Cost	($164) [See Step #3]
Cost of Goods Sold	$796

	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
$297	$205	$160	$112	[160 x 70.0% x 1.0]
	[ 297 / 1.45 ]	$45	$52	[45 x 80.0% x 1.45]
Total ending Inventory at dollar value LIFO retail cost			$164