Question

Sunland Company began operations on January 1, 2019, adopting the conventional retail inventory system. None of the company’s merchandise was marked down in 2019 and, because there was no beginning inventory, its ending inventory for 2019 of $38,800 would have been the same under either the conventional retail system or the LIFO retail system. On December 31, 2020, the store management considers adopting the LIFO retail system and desires to know how December 31, 2020, inventory would appear under both systems. All pertinent data regarding purchases, sales, markups, and markdowns are shown below. There has been no change in the price level. Cost Retail Inventory, Jan. 1, 2020 $38,800 $60,000 Markdowns (net) 13,100 Markups (net) 22,100 Purchases (net) 130,800 181,300 Sales (net) 167,500 Determine the cost of the 2020 ending inventory under both (a) the conventional retail method and (b) the LIFO retail method. (Round ratios for computational purposes to 2 decimal place, e.g. 78.72% and final answers to 0 decimal places, e.g. 28,987.) (a) Ending inventory using conventional retail method $enter a dollar amount rounded to 0 decimal places (b) Ending inventory LIFO retail method $enter a dollar amount rounded to 0 decimal places

Answer 1

(a)	Conventional Retail Method
		Cost	Retail
	Inventory, January 1, 2020	$38,800	$60,000
	Purchases (net)	$130,800	$181,300
		$169,600	$241,300
	Add: Net markups		$22,100
	Totals	$169,600	$263,400
	Deduct: Net markdowns		$13,100
	Sales price of goods available		$250,300
	Deduct: Sales (net)		$167,500
	Ending inventory at retail		$82,800
	Cost-to-retail ratio	64.39%
	($169,600/$263,400)
	Ending inventory at cost	$53,315
	($82,800 x 64.39%)
(b)	LIFO Retail Method
		Cost	Retail
	Inventory, January 1, 2020	$38,800	$60,000
	Purchases (net)	$130,800	$181,300
	Add: Net markups		$22,100
	Deduct: Net markdowns		$13,100
	Total (excluding beginning inventory)	$130,800	$190,300
	Total (including beginning inventory)	$169,600	$250,300
	Deduct: Sales (net)		$167,500
	Ending inventory at retail		$82,800
	Cost-to-retail ratio	68.73%
	($130,800/$190,300)
	Ending Inventory at Retail Prices	Layers at Retail prices	Cost to Retail (Percentage)	Ending Inventory at LIFO Cost
	$82,800	$60,000	64.67%	$38,802
		$22,800	68.73%	$15,670
				$54,472