Question

On January 1, 2021, the Coldstone Corporation adopted the dollar-value LIFO retail inventory method. Beginning inventory at cost and at retail were $180,000 and $282,000, respectively. Net purchases during the year at cost and at retail were $604,500 and $920,000, respectively. Markups during the year were $10,000. There were no markdowns. Net sales for 2021 were $900,000. The retail price index at the end of 2021 was 1.04. What is the inventory balance that Coldstone would report in its 12/31/2021 balance sheet?

		A) $195,000.
		B) $312,000.
		C) $192,168.
		D) $202,800

Answer 1

	Correct option is: C) $192,168
	Workings:
		Cost	Retail	Cost to retail Percentage
	Beginning Inventory	$                    1,80,000	$   2,82,000
Add:	Net Purchases	$                    6,04,500	$   9,20,000
Add:	Net Markups		$       10,000
Less:	Net Markdowns		$                -
	Goods available for sale (excluding beginning inventory)	$                    6,04,500	$   9,30,000	65.00%
	Goods available for sale (including beginning inventory)	$                    7,84,500	$ 12,12,000
Less:	Net Sales		$   9,00,000
	Ending Inventory at retail		$   3,12,000
	Inventory as per dollar-value LIFO Method:
	Ending Inventory at base year retail price	($312000/1.40)	$   3,00,000
	Increase in Inventory	($300000 - $282000)	$       18,000
	Inventory converted to retail	($18000*1.40)	$       18,720
	Cost to retail Percentage		65%
	Inventory added at cost	($18720 * 65%)	$       12,168
	Dollar-value LIFO Inventory	($180000 + $12168)	$   1,92,168