Question

Raleigh Department Store uses the conventional retail method for the year ended December 31, 2019. Available information follows:

1. The inventory at January 1, 2019, had a retail value of $50,000 and a cost of $36,200 based on the conventional retail method.
2. Transactions during 2019 were as follows:

	Cost			Retail
Gross purchases	$	333,900		$	540,000
Purchase returns		6,400			15,000
Purchase discounts		5,500
Gross sales					500,000
Sales returns					8,000
Employee discounts					5,500
Freight-in		29,000
Net markups					30,000
Net markdowns					15,000

Sales to employees are recorded net of discounts.

3. The retail value of the December 31, 2020, inventory was $104,325, the cost-to-retail percentage for 2020 under the LIFO retail method was 70%, and the appropriate price index was 107% of the January 1, 2020, price level.
4. The retail value of the December 31, 2021, inventory was $53,350, the cost-to-retail percentage for 2021 under the LIFO retail method was 69%, and the appropriate price index was 110% of the January 1, 2020, price level.

Required:
3. Assume Raleigh Department Store adopts the dollar-value LIFO retail method on January 1, 2020. Estimating ending inventory for 2020 and 2021.

Total ending inventory at dollar-value LIFO retail cost, 2020: Total ending inventory at dollar-value LIFO retail cost, 2021:

Answer 1

Solution:

LIFO Retail Method
	Cost	Retail	Cost to Retail ratio
Beginning Inventory	36200	50000
Add: Purchases	333900	540000
Add: Freight In	29000
Less: Purchase Return	-6400	-15000
less: Purchase Discounts	-5500
Add: Net Markups		30000
Less: Net Markdowns		-15000
Goods Available for Sale (excluding beginning inventory)	351000	540000
Goods Available for Sale (including beginning inventory)	387200	590000
Cost-to-retail Percentage ($351000/540000)			65%
Less: net sales		-4,92,000.00
Less: Employee Discounts		-5500
Estimated Ending Inventory at Retail		92,500
Estimated Ending Inventory at Cost	63825
Estimated Ending Inventory at Cost (Working):
	Retail	Cost
Beginning Inventory	50000	36200
Current Period's Layer	42,500	27625
Total	92500	63825

Raleigh Department Store
Dollar-Value LIFO Retail Method
Ending Inventory at Year-end Retail Prices	Ending Inventory at Base Year Retail Prices	Inventory Layers at Base Year Retail Prices	Inventory Layers Converted to Cost
Year 2020
104325	97500	92,500.00	63825
		5,000.00	3745
Total Ending Inventory at dollar-value LIFO retail Cost	67570
Year 2021
53350	48500	48500	33465
Total Ending Inventory at dollar-value LIFO retail Cost	33465