Question

On January 1, 2018, the Brunswick Hat Company adopted the dollar-value LIFO retail method. The following data are available for 2018:

	Cost		Retail
Beginning inventory	$	84,600	$	141,000
Net purchases		129,500		264,000
Net markups				5,000
Net markdowns				10,000
Net sales				229,000
Retail price index, 12/31/18				1.20

Required:
Calculate the estimated ending inventory and cost of goods sold for 2018.

171000

	Ending inventory at retail Ending inventory at cost Cost of goods sold

Answer 1

Ending Inventory at Retail	$171,000
Ending Inventory at Cost	$85,500
Cost of Goods Sold	$128,600

• Workings

	Cost	Retail	Cost to retail %
Beginning Inventory	$84,600	$141,000	60.000%
Net Purchases	$129,500	$264,000
Net Mark ups		$5,000
Net Mark downs		($10,000)
Purchases	$129,500	$259,000	50.000%
Goods available for sale	$214,100	$400,000
Net Sales		($229,000)
Ending Inventory at Retail		$171,000 [go to Step 1 below]
Ending Inventory at Cost	($85,500) [come back from Step 3]
Cost of Goods Sold	$128,600

	Step 1	Step 2	Step 3
Ending Inventory at Year end retail prices	Ending Inventory at Year end BASE YEAR retail prices	Inventory Layer at base year retail prices	Inventory Layers converted to cost
$171,000	$142,500	$141,000	$84,600	[$141000 x 60% x 1.00]
	[ 171000 / 1.2 ]	$1,500	$900	[$1500 x 50% x 1.20]
Total ending Inventory at dollar value LIFO retail cost			$85,500