Question

As of January 1, 2017, Cheyenne Inc. adopted the retail method of accounting for its merchandise inventory.

To prepare the store’s financial statements at June 30, 2017, you obtain the following data.

		Cost			Selling Price
Inventory, January 1		$30,800			$43,600
Markdowns					9,400
Markups					9,100
Markdown cancellations					6,000
Markup cancellations					3,200
Purchases		116,576			155,700
Sales revenue					151,500
Purchase returns		2,800			4,400
Sales returns and allowances					7,800

Part 1

Correct answer iconYour answer is correct.

Compute Cheyenne’s June 30, 2017, inventory under the conventional retail method of accounting for inventories. (Round ratios for computational purposes to 0 decimal places, e.g. 78% and final answer to 0 decimal places, e.g. 28,987.)

Inventory under the conventional retail method

$

$38,664 (I got correct, but not part 2)

Part 2

Incorrect answer iconYour answer is incorrect.

Without prejudice to your solution to part (a), assume that you computed the June 30, 2017, inventory to be $58,320 at retail and the ratio of cost to retail to be 70.64%. The general price level has increased from 100 at January 1, 2017, to 108 at June 30, 2017. Compute the June 30, 2017, inventory at the June 30 price level under the dollar-value LIFO retail method. (Round ratios for computational purposes to 2 decimal places, e.g. 78% and final answer to 0 decimal places, e.g. 28,987.)

Ending inventory at dollar-value LIFO cost

$

Answer 1

The First Part is correct .

2)Under LIFO units acquired last are sold first ,so ending inventory is left from Beginning inventory first and then from initially purchase Balance (in short inventory purchased first) .

Inventory at cost (under new assumption at current year price level ) =Inventory at retail * cost to retail ratio

                                            = 58320 * 70.64%

                                           = $ 41197.248

Inventory at Base year price = Inventory at current year price level *base year price level /current year price level

                                        = 41197.248 *100 /108

                                 = 38145.60

	Inventory at cost (Base level Price )	*	Price Level (out of base year level which is 100)	=	Inventory at current year price level
Beginning	30800		100/100		30800
current year	38145.60 -30800= 7345.60		108/100		7933.25
Ending inventory at dollar-value LIFO cost					38733.25

Ending inventory at dollar-value LIFO cost   =$ 38733 Rounded