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Lance-Hefner Specialty Shoppes decided to use the dollar-value LIFO retail method to value its inventory. Accounting...

Lance-Hefner Specialty Shoppes decided to use the dollar-value LIFO retail method to value its inventory. Accounting records provide the following information:

Cost Retail
Merchandise inventory, January 1, 2018 $ 182,000 $ 280,000
Net purchases 372,600 535,000
Net markups 10,000
Net markdowns 5,000
Net sales 400,000


Related retail price indexes are as follows:

January 1, 2018 1.00
December 31, 2018 1.20


Required:
Determine ending inventory and cost of goods sold.

Ending Inventory at retail
Ending Inventory at cost
COGS

Solutions

Expert Solution

Solution:

Lance Hefner Specialty Shoppes
Cost   Retail Cost to Retail ratio
Beginning Inventory 182000 280000
Net Purchases 372600 535000
Add: Net Markups 10000
Less: Net Markdowns -5000
Goods Available for Sale (excluding beginning inventory) 372600 540000
Goods Available for Sale (including beginning inventory) 554600 820000
Cost-to-retail Percentage ($385000/550000) 69.00%
Net Sales -4,00,000.00
Ending Inventory at Retail 4,20,000
Ending Inventory at Cost 239960
Cost of goods sold 314640
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
4,20,000 350000 2,80,000.00 182000
70,000.00 57960
Total Ending Inventory at dollar-value LIFO retail Cost 239960

hence,

Ending inventory at retail 420000
Ending Inventory at Cost 239960
Cost of goods sold 314640

ekkarill92 answered 2 years ago
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