Question
In: Accounting
Carla Vista Company, which uses the retail LIFO method to determine inventory cost, has provided the...
Carla Vista Company, which uses the retail LIFO method to
determine inventory cost, has provided the following information
for 2020:
|
Cost |
Retail |
|||
| Inventory, 1/1/20 |
$ 289000 |
$427000 |
||
| Net purchases |
1204000 |
1756000 |
||
| Net markups |
211000 |
|||
| Net markdowns |
97000 |
|||
| Net sales |
1660000 |
Assuming stable prices (no change in the price
index during 2020), what is the cost of Carla Vista's inventory at
December 31, 2020? (Hint: Round intermediate calculation to 2
decimal places, e.g. 0.63 and final answer to 0 decimal
places.)
| $410800. |
| $423400. |
| $407680. |
| $417100. |
Solutions
Expert Solution
Answer : $4,23,400 (Option B)
Explanation :
The cost/retail ratio makes up one of the main components used to calculate the retail inventory method. Two methods exist for calculating the cost/retail ratio. The first method, called the conventional retail method includes markups but excludes markdowns. This method results in a lower ending inventory value. The second method, simply called the retail method, uses both markups and markdowns to calculate the ratio. This method results in a higher-ending inventory value.
Cost of inventory under retail LIFO method :
| Particulars | cost | retail | cost to retail (%) |
| Beginning inventory | $2,89,000 | $4,27,000 | 67.68% |
| (+) Purchases | $12,04,000 | $17,56,000 | |
| (+)Markup | $2,11,000 | ||
| (-)Markdown | ($97,000) | ||
| Goods available for sale (Excluding inventory) | $12,04,000 | $18,70,000 | 64% |
| Goods available for sale (Including inventory) | $14,93,000 | $22,97,000 | |
| (-)sales | ($16,60,000) | ||
| Ending inventory at retail | $6,37,000 | ||
|
Ending inventory at cost $4,27,000× 67.682% + $2,10,000 × 64% = $2,89,000 + $1,34,400 = $4,23,400 |
$4,23,400 |
ekkarill92 answered 3 years agoRelated Solutions
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Harmes Company is a clothing store that uses the retail
inventory method. The following information relates to its
operations during 2016:
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$41,500
Purchases
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104,100
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Harmes Company is a clothing store that uses the retail
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operations during 2016:
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Purchases
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100,100
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Required:
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for the following cost flow assumption: FIFO. Round the
cost-to-retail ratio to three decimal places. If necessary, round
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Sparrow Company uses the retail inventory method to estimate ending inventory and cost of goods sold....
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Purchases
352,000
579,000
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Purchase returns
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Net markdowns
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Purchases 335,000. 580,000
Freight in 9,000
Purchase returns. 7,000 11,000
Net markups 16,000
Net markdowns 12,000
Normal spoilage 3,000
Abnormal spoliage. 4,800 8,000
Sales 540,000
Sales returns 10,000
The company records sales net of employee discounts. Discounts
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Required:
Estimate Sparrow’s ending inventory and cost of goods sold...
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follows: Cost Retail Beginning inventory $ 83,000 $ 173,000
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10,300 Net markups 15,300 Net markdowns 11,300 Normal spoilage
2,300 Abnormal spoilage 4,405 7,300 Sales 533,000 Sales returns
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Purchases 360,000 582,000 Freight-in 9,200 Purchase returns 7,200
11,200 Net markups 16,200 Net markdowns 12,200 Normal spoilage
3,200 Abnormal spoilage 4,840 8,200 Sales 542,000 Sales returns
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Purchase returns
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11,600
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Net markdowns
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Normal spoilage
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2018 totaled $4,600.
Required:
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