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 2 years agoRelated Solutions
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Harmes Company is a clothing store that uses the retail
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operations during 2016:
Cost
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$41,500
Purchases
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104,100
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—
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Harmes Company is a clothing store that uses the retail
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operations during 2016:
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Inventory, January 1
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Purchases
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100,100
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Required:
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for the following cost flow assumption: FIFO. Round the
cost-to-retail ratio to three decimal places. If necessary, round
dollar amounts to the nearest whole...
Sparrow Company uses the retail inventory method to estimate ending inventory and cost of goods sold....
Sparrow Company uses the retail inventory method to estimate
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Beginning inventory
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$
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Purchases
352,000
579,000
Freight-in
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Purchase returns
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10,900
Net markups
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Net markdowns
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Normal spoilage
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Abnormal spoilage
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7,900
Sales
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Sales returns
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The company records sales net of employee discounts. Discounts for
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Required:
1. Estimate Sparrow’s ending inventory and cost of
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Begining inventory. $90,000. $180,000
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
for 2016 totaled $4,000.
Required:
Estimate Sparrow’s ending inventory and cost of goods sold...
Sparrow Company uses the retail inventory method to estimate ending inventory and cost of goods sold....
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ending inventory and cost of goods sold. Data for 2021 are as
follows: Cost Retail Beginning inventory $ 83,000 $ 173,000
Purchases 368,000 573,000 Freight-in 8,300 Purchase returns 6,300
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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361,000
586,000
Freight-in
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Purchase returns
7,600
11,600
Net markups
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Net markdowns
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Normal spoilage
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Abnormal spoilage
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Sales
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Sales returns
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2018 totaled $4,600.
Required:
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