Question

The following information is available from TJ Foods Inc. for the year ended December 31, 2019:
                           At Cost At Retail

Sales 100000

Purchases 48000   90000

Inventory January 1, 2019    24000 54000

Net Additional Markups 12000

Net Markdowns 6000

Required

a)What is the inventory cost on December 31, 2019 under the average cost retail method (Non LCM)?

b) What is the inventory cost on December 31, 2019 under the retail method on FIFO basis, LCM?

Answer 1

Particulars	At cost	At retail
Sales	100,000
Purchases	48,000	90,000
Inventory on 01/01/2019	24,000	54,000
Net additional markups	12,000
Net Markdowns	6,000
Computation of inventory cost on December 31, 2019 under the average cost retail method
Cost to retail %	64%	(Computed in cosideration of additional markup)
calculation of ending inventory :
Opening inventory	24,000
Purchases	48,000
Goods available for sale	72,000
sales	64,000	(100000*64%)
Ending inventory	8,000
Computation of inventory cost on December 31, 2019 under the retail method on FIFO basis, Lower of cost or market value
	Mark up	Mark down
Sales	100,000	100,000
Mark ups / Mark down	12,000	(6,000)
Net sales	112,000	94,000
Inventory on 01/01/2019	(24,000)	(24,000)
Purchases	(48,000)	(48,000)
Ending inventory	40,000	22,000