Question

Grouper 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 $37,700 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		$37,700			$60,500
Markdowns (net)					13,000
Markups (net)					22,000
Purchases (net)		133,500			177,500
Sales (net)					168,600

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

Answer 1

1. Conventional retail method

	Cost	Retail
Beginning inventory	$37,700	$60,500
Add: net purchases	$133,500	$177,500
Net markups		$22,000
Totals	$171,200	$260,000
Cost-to-retail ratio =$171,200/$260,000 =65.84%
Less: Net markdowns		($13,000)
Sales		($168,600)
Ending inventory at retail		$78,400
Ending inventory at cost($78,400×65.84%)	$51,619

B. LIFO retail method

	Cost	Retail
Beginning inventory	$37,700	$60,500
Add: Net Purchases	$133,500	$177,500
Net markups		$22,000
Less: Net markdowns		($13,000)
Total ( excluding beginning inventory)	$133,500	$186,500
Total ( Including beginning inventory)	$171,200	$247,000
Cost-to-retail ratio =$171,200/$247,000 =69.31%
Less: Net sales		($168,600)
Ending inventory at retail		$78,400
Ending inventory at cost($78,400×69.31%)	$54,339

____×____

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