Question

Q26

Data below for the year ended December 31, 2021, relates to Houdini Inc. Houdini started business January 1, 2021, and uses the LIFO retail method to estimate ending inventory.

	Cost			Retail
Beginning inventory	$	80,000		$	112,000
Net purchases		339,840			500,000
Net markups					28,000
Net markdowns					48,000
Net sales					447,000

  
Estimated ending inventory at cost is: (Do not round intermediate calculations):

Multiple Choice

• $98,752.

• None of these answer choices are correct.

• $103,364.

• $107,480.

Answer 1

• Correct Answer = Option #3: $ 103,364

--Working

	Cost	Retail	Cost to retail %
Beginning Inventory	$80,000	$112,000	71.429%
Net Purchases	$339,840	$500,000
Net Mark ups	$0	$28,000
Net Mark downs		($48,000)
Purchases	$339,840	$480,000	70.800%
Goods available for sale	$419,840	$592,000
Net Sales		($447,000)
Ending Inventory at Retail		$145,000
Ending Inventory at Cost	($103,364)

	Step 1	Step 2	Step #3
Ending Inventory at Year end retail prices	Ending Inventory at Year end BASE YEAR retail prices	Inventory Layer at base year retail prices	Inventory Layers converted to cost
$145,000	$145,000	$112,000	$80,000	[112000 x 71.429%]
	[ 145000 / 1 ]	$33,000	$23,364	[33000 x 70.8%]
Total ending Inventory at dollar value LIFO retail cost			$103,364