Question

On January 1, 2021, Pet Friendly Stores adopted the 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	$	102,300		$	165,000
Purchases		484,000			715,000			$	625,000		$	974,000
Purchase returns		2,800			1,500				2,500			6,100
Freight-in		5,000							8,000
Net markups					5,500							8,400
Net markdowns					4,000							6,300
Net sales to customers					634,000							660,000
Sales to employees (net of 30% discount)					11,900							11,900
Normal spoilage					5,200							4,100
Price Index:
January 1, 2021		1.00
December 31, 2021		1.25
December 31, 2022		1.25

Required:
1. Estimate the 2021 and 2022 ending inventory and cost of goods sold using the dollar-value LIFO retail method.

2021 Estimated ending inventory at retail -

2021 Estimated ending inventory at cost -

2021 Estimated cost of goods sold -

2022 Estimated ending inventory at retail -

2022 Estimated ending inventory at cost -

2022 Estimated cost of goods sold -

2. Estimate the 2021 ending inventory and cost of goods sold using the average cost retail method.

Average Cost Method Estimated ending inventory at retail -

Average Cost Method Estimated ending inventory at cost -

Average Cost Method Estimated cost of goods sold -

3. Estimate the 2021 ending inventory and cost of goods sold using the conventional retail method.

Conventional Retail Method Estimated ending inventory at retail -

Conventional Retail Method Estimated ending inventory at cost -

Conventional Retail Method Estimated cost of goods sold -

Answer 1

Answer-1:

Sales to employee has been made at discounted price. It need to be adjusted first.

For year 2021 & 2022: Sales made to employee net 30% is $11,900.

Gross Sales = $11,900 /70 × 100 = $17,000

So, discount amount = $17,000 - $11,900 = $5,100.

This discount amount need to be deducted from sales amount to adjust the net sales amount.

Hence, for 2021, adjusted sales amount is = $634,000 - $5,100 = $628,900   

for 2022, adjusted sales amount is = $660,000 - $5,100 = $654,900

Note: Ending inventory at base year retail price is calculated using price index.

2021 Estimated ending inventory at retail - $245,900

2021 Estimated ending inventory at cost - $129,262

2021 Estimated cost of goods sold - $459,238

2022 Estimated ending inventory at retail - $556,900

2022 Estimated ending inventory at cost - $331,412

2022 Estimated cost of goods sold - $428,350