Question
In: Accounting
On January 1, 2021, Sanderson Variety Store adopted the dollar-value LIFO retail inventory method. Accounting records...
On January 1, 2021, Sanderson Variety Store adopted the
dollar-value LIFO retail inventory method. Accounting records
provided the following information:
| Cost | Retail | |||||
| Beginning inventory | $ | 43,800 | $ | 73,000 | ||
| Net purchases | 169,940 | 295,000 | ||||
| Net markups | 5,000 | |||||
| Net markdowns | 7,000 | |||||
| Net sales | 272,000 | |||||
| Retail price index, end of year | 1.04 | |||||
During 2022, purchases at cost and retail were $191,675 and
$348,500, respectively. Net markups, net markdowns, and net sales
for the year were $8,000, $9,000, and $305,000, respectively. The
retail price index at the end of 2022 was 1.05.
Estimate ending inventory in 2022 using the dollar-value LIFO
retail method. (Round your intermediate calculations to the
nearest whole dollar. Round ratio calculation to the nearest whole
percent.)
Solutions
Expert Solution
Step 1: Calculate Ending Inventory at Current Year Retail Prices for 2021
The value of ending inventory at current year retail prices for 2021 is calculated as below:
| Beginning Inventory | 73,000 |
| Add Net Purchases | 295,000 |
| Net Markups | 5,000 |
| Less Net Markdowns | -7,000 |
| Goods Available for Sale | 366,000 |
| Less Net Sales | -272,000 |
| Estimated Ending Inventory at Current Year Retail Prices | $94,000 |
_____
Step 2: Calculate Ending Inventory at Cost for 2021
The value of ending inventory at cost for 2021 is determined as follows:
|
Ending Inventory at Year-End Retail Prices for 20211 |
Ending Inventory at Base Year Retail Prices (1) |
Inventory Layers at Base Year Retail Prices (2) | Inventory Layers Converted to Cost (3) | |||
| 94,000 | 90,385 (94,000/1.04) | 73,000 (Base) | X | 1 | 60% (43,800/73,000*100) | 43,800 (73,000*1*60%) |
| 17,385 (90,385 - 73,000) [2021] | X | 1.04 | 58% [169,940/(295,000+5,000-7,000)] | 10,487 (17,385*1.04*58%) | ||
| Total Ending Inventory at Cost | $54,287 | |||||
_____
Step 3: Calculate Ending Inventory at Current Year Retail Prices for 2022
The value of ending inventory at current year retail prices for 2022 is calculated as below:
| Beginning Inventory | 94,000 |
| Add Net Purchases | 348,500 |
| Net Markups | 8,000 |
| Less Net Markdowns | -9,000 |
| Goods Available for Sale | 441,500 |
| Less Net Sales | -305,000 |
| Estimated Ending Inventory at Current Year Retail Prices | $136,500 |
_____
Step 4: Calculate Ending Inventory at Cost for 2022
The value of ending inventory at cost for 2022 is determined as below:
|
Ending Inventory at Year-End Retail Prices for 2022 |
Ending Inventory at Base Year Retail Prices (1) |
Inventory Layers at Base Year Retail Prices (2) | Inventory Layers Converted to Cost (3) | |||
| 136,500 | 130,000 (135,000/1.05) | 73,000 (Base) | X | 1 | 60% | 43,800 |
| 17,385 (2021) | X | 1.04 | 58% | 10,487 | ||
| 39,615 (130,000 - 73,000 - 17,385) [2022] | X | 1.05 | 55% [191,675/(348,500+8,000-9,000)] | 22,878 (39,615*1.05*55%) | ||
| Total Ending Inventory at Cost | $77,164 | |||||
Answer is $77,164.
_____
Notes:
There can be a slight/minor difference in the final answer on account of rounding off values.
ekkarill92 answered 2 years agoRelated Solutions
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