Question

Martinez Company began operations on January 1, 2019, adopting the conventional retail inventory system. None of the company’s merchandise was marked down in 2019 and, because there was no beginning inventory, its ending inventory for 2019 of $38,300 would have been the same under either the conventional retail system or the LIFO retail system.

On December 31, 2020, the store management considers adopting the LIFO retail system and desires to know how the December 31, 2020, inventory would appear under both systems. All pertinent data regarding purchases, sales, markups, and markdowns are shown below. There has been no change in the price level.

		Cost			Retail
Inventory, Jan. 1, 2020		$38,300			$60,200
Markdowns (net)					12,700
Markups (net)					22,100
Purchases (net)		128,800			181,200
Sales (net)					169,500

Determine the cost of the 2020 ending inventory under both (a) the conventional retail method and (b) the LIFO retail method. (Round ratios for computational purposes to 2 decimal place, e.g. 78.72% and final answers to 0 decimal places, e.g. 28,987.)

(a)		Ending inventory using conventional retail method		$enter a dollar amount rounded to 0 decimal places
(b)		Ending inventory LIFO retail method

Answer 1

Ending inventory using conventional retail method
	cost	at retails
Beginning ineventory	38300	60200
purchases	128800	181200
Total	167100	241400
add: mark ups		22100
		263500
less: mark down		-12700
		250800
sales		-169500
ending inventory - retail		81300
		rounded 2 decimal
Ratio =167100/263500 =	63.4156%	63.42%
ending inventory at cost
= 63.42% * 81300	51560

Ending inventory LIFO retail method
	cost	at retails	Ratio
Beginning inventory	38300	181200
purchases	128800	181200
add: mark ups		22100
less: mark down		-12700
Total excluding beginning inventory	128800	190600	= 67.58% (128800/190600)
sales		-169500
ending inventory - retail		21100
ending inventory at cost
Opening inventory (LIFO)	38300
add: increment cost (67.58%*21100)	14259
Ending inventory	52559