Question

In: Accounting

On January 1, 2021, the Coldstone Corporation adopted the dollar-value LIFO retail inventory method. Beginning inventory...

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

Solutions

Expert Solution

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

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