Question

Alquist Company uses the retail method to estimate its ending inventory. Selected information about its year 2018 operations is as follows:

January 1, 2018, beginning inventory had a cost of $160,000 and a retail value of $220,000.

Purchases during 2018 cost $1,663,000 with an original retail value of $2,440,000.

Freight costs were $17,000 for incoming merchandise.

Net additional markups were $215,000 and net markdowns were $255,000.

Based on prior experience, shrinkage due to shoplifting was estimated to be $22,000 of retail value.

Merchandise is sold to employees at a 20% of selling price discount. Employee sales are recorded in a separate account at the net selling price. The balance in this account at the end of 2018 is $320,000.

Sales to customers totaled $1,910,000 for the year.

Required:
1. Estimate ending inventory and cost of goods sold using the conventional retail method.
2. Estimate ending inventory and cost of goods sold using the LIFO retail method. (Assume stable prices.)

(For all requirements, Round your intermediate calculations and final answers to whole dollars.)

	Conventional Retail Method	LIFO Retail Method
Estimated ending inventory at retail
Estimated ending inventory at cost
Estimated cost of goods sold

Answer 1

	Conventional Retail Method	LIFO Retail Method
Estimated ending inventory at retail	$       328,000.00
Estimated ending inventory at cost		$   242,105.26
Estimated cost of goods sold	$    1,622,290.08	$1,597,894.74
Working Notes
Retail method of Inventory Valuation and Cost of Goods Sold
	Cost		Retail Value
Opening Inventory	$       160,000.00		$     220,000.00
Purchases	$    1,663,000.00		$ 2,440,000.00
Freight	$         17,000.00
Inventory	$   1,840,000.00		$ 2,660,000.00
Cost to Retail Ratio				0.69	[A]
Cost / Retail Value
Add : Mark Up			$     215,000.00
	$   1,840,000.00		$ 2,875,000.00
Cost to Retail Ratio				0.64	[B]
Cost / Retail Value
Less : Mark Down			$   (255,000.00)
	$   1,840,000.00		$ 2,620,000.00
Cost to Retail Ratio				0.70	[C]
Cost / Retail Value
Cost of Goods Sold
Sales
- To other customers			$ 1,910,000.00
- To employees after grossing up of 20% Discount			$    400,000.00
Total Sales ( at Selling Price)			$ 2,310,000.00
Cost to Retail Ratio (After markup and mark downs)			0.70
Cost of Goods Sold as per Retail Method of Inventory			$ 1,622,290.08
Ending Inventory as per Retail Method of Inventory
Opening Inventory			$     220,000.00
Purchases			$ 2,440,000.00
Sales			$ (2,310,000.00)
Less : Shrinkage			$     (22,000.00)
Inventory			$     328,000.00
LIFO Method of Inventory
Opening Inventory	$       160,000.00
Purchases	$    1,663,000.00
Add:
Freight	$         17,000.00
Cost of Purchase	$   1,680,000.00
Total Inventory Cost	$    1,840,000.00
Total Sales	$    2,310,000.00
Cost to Retail Ratio (Without Markup and Mark Down)	0.69
Cost of Goods Sold	$    1,597,894.74
Inventory as Per LIFO Method	$       242,105.26