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In: Accounting
On January 1, 2021, HGC Camera Store adopted the dollar-value LIFO retail inventory method. Inventory transactions...
On January 1, 2021, HGC Camera Store adopted the dollar-value
LIFO retail inventory method. Inventory transactions at both cost
and retail, and cost indexes for 2021 and 2022 are as
follows:
| 2021 | 2022 | |||||||||||
| Cost | Retail | Cost | Retail | |||||||||
| Beginning inventory | $ | 31,200 | $ | 48,000 | ||||||||
| Net purchases | 82,720 | 112,000 | $ | 90,275 | $ | 118,800 | ||||||
| Freight-in | 2,400 | 2,900 | ||||||||||
| Net markups | 12,000 | 8,800 | ||||||||||
| Net markdowns | 2,400 | 2,600 | ||||||||||
| Net sales to customers | 109,815 | 104,960 | ||||||||||
| Sales to employees (net of 20% discount) | 2,900 | 4,640 | ||||||||||
| Price Index: | ||||||||||||
| January 1, 2021 | 1.00 | |||||||||||
| December 31, 2021 | 1.04 | |||||||||||
| December 31, 2022 | 1.10 | |||||||||||
Required:
Estimate the 2021 and 2022 ending inventory and cost of goods sold
using the dollar-value LIFO retail inventory method.
|
Solutions
Expert Solution
| 2021 | 2022 | |||||
| Cost | Retail | cost to retail ratio | Cost | Retail | cost to retail ratio | |
| Beginning inventory | 31200 | 48000 | .65 or 65% | 35568 | 56160 | |
| Purchase | 82720 | 112000 | 90275 | 118800 | ||
| Freight in | 2400 | 2900 | ||||
| Net mark Up | 12000 | 8800 | ||||
| Net markdown | -2400 | -2600 | ||||
| Total excluding beginning inventory | 82720+2400=85120 |
112000+12000-2400 121600 |
85120/121600=.70 or 70% | 90275+2900=93175 | 118800+8800-2600=125000 | 93175/125000=.7454 or 74.54% |
| Goods available for sale (Total excluding beginning inventory plus beginning inventory) | 116320 | 169600 | 128743 | 181160 | ||
| less:Net sales | (113440) | ( 110760) | ||||
| Ending inventory | 35568 | 56160 | 43767 | 70400 | ||
| Estimated cost of goods sold | 116320-35568= 80752 | 128743-43767=84976 |
#sales to employees (not net of discount) = Sales net /(1-discount)
sales 2021 :External sales +sales to employees (not net of discount)
109815+ [2900/(1-.20)]
109815+ 3625
113440
Sales 2022 : 104960+ [4640/(1-.20)]
104960+5800
110760
#Under LIFO units acquired last are sold first so ending inventory is left from initial inventory balance .
| 2021 | Ending Inventory at retail (at price Index) | Ending inventory (At base year) | Ending inventory at base year price left as (amounting to 54000) | Ending inventory at price index | Ending inventory at cost |
| 56160 | 56160 *1/1.04=54000 | Beginning :48000 | 48000*1=48000 | 48000*65%= 31200 | |
| Current year :54000-48000= 6000 | 6000*1.04= 6240 | 6240*70%= 4368 | |||
| Ending inventory at cost | 35568 |
| 2022 | Ending Inventory at retail (at price Index) | Ending inventory (At base year) | Ending inventory at base year price left as (amounting to 64000) | Ending inventory at price index | Ending inventory at cost |
| 70400 | 70400*1/1.10= 64000 | Beginning :48000 | 48000*1=48000 | 48000*65%= 31200 | |
| 2021: 6000 (last computed_ | 6000*1.04= 6240 | 6240*70%= 4368 | |||
| 2022 : 10000 | 10000*1.1= 11000 | 11000*74.54%=8199.4 | |||
| Ending inventory at cost | 43767.4 (rounded to 43767) |
ekkarill92 answered 1 year agoRelated Solutions
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Retail
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Retail Price
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Percentage
Date
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%
12/31/2022
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Required:
1. What is the cost-to-retail percentage for the
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