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.

Answer 1

Aswer :-

	Cost	Retail	Cost-to-Retail Ratio
Beginning Inventory	$36,200.00	$50,000.00
Add Purchases	$333,900.00	$540,000.00
Freight In	$29,000.00
Less: Purchase Returns	-$6,400.00	-$15,000.00
Purchase Discounts	-$5,500.00
Add: Net Markups		$30,000.00
Less: Net Markdowns		-$15,000.00
Goods Available for Sale (Excluding Beginning Inventory)	$351,000.00	$540,000.00
Goods Available for Sale (Including Beginning Inventory)	$387,200.00	$590,000.00
Cost to Retail Percentage ($351,000/ $540,000* 100)			65.00%
Less: Net Sales ($500,000 - $8,000)		-$492,000.00
Employee Discounts		-$5,500.00
Estimated Ending Inventory at Retail		$92,500.00
Estimated Ending Inventory at Cost	$63,825.00

Workings:
The value of ending inventory for is determined as below:
Estimated Ending Inventory at Cost:
	Retail	Cost
Beginning Inventory	$50,000	$36,200
Current Period's Layer	$42,500($92,500- 50,000)	$27,625(42,500*65%)
Total	$92,500.00	$63,825.00

2020
Ending Inventory at Base Year Retail Prices	Inventory Layers at Base Year Prices	Inventory Layers Converted to Cost
$97,500($104,325/1.07)	$92,500	$63,825(92,500*1*63,825 / 92,500)
	$5,000 (97,500 - 92,500)	$ 3,745(5,000*1.07*70%)
Total Ending Inventory at Dollar-Value LIFO Retail Cost	$67,570.00

2021
Ending Inventory at Base Year Retail Prices	Inventory Layers at Base Year Prices	Inventory Layers Converted to Cost
$48,500 ($53,350/ 1.10)	$48,500	$33,465(48,500*1*69%)
Total Ending Inventory at Dollar-Value LIFO Retail Cost	$33,465.00