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On December 31, 2017, the store management considers adopting the LIFO retail system and desires to...

On December 31, 2017, the store management considers adopting the LIFO retail system and desires to know how the December 31, 2017, 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, 2017 $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 2017 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 $ (b) Ending inventory LIFO retail method

Solutions

Expert Solution

a)Ending inventory using conventional retail method

Cost Retail cost to retail ratio
Beginning inventory 38300 60200
purchase 128800 181200
Markup 22100
Inventory after markup 167100 263500 167100/263500=.6342 or 63.42%
markdown (12700)
Inventory afer markdown 250800
sales (169500)
Ending inventory at retail 81300

Ending inventory at cost : Ending inventory at retail *5

               = 81300 *.6342

               = $ 51560

b)

Ending inventory LIFO retail method

cost Retail cost to retail ratio
Beginning 38300 60200
purchase 128800 181200
markup 22100
Markdown (12700)
Inventory without Beginning inventory 128800 190600 128800/190600=.6758 or 67.58%
Inventory with beginning inventory 167100 250800
less:sales (169500)
ending inventory at retail 81300

Ending inventory at cost under LIFO :under LIFO units acquired last are sold first ,so ending inventory are left out of initial balance

Retail cost
beginning 60200 38300
current purchase 81300-60200=21100 21100*.6758 = 14259
Ending inventory at cost 52559

ekkarill92 answered 1 year ago
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