This exercise is a continuation of BE 9–11. During 2022, purchases at cost and retail were $168,000 and $301,000

This exercise is a continuation of BE 9–11. During 2022, purchases at cost and retail were $168,000 and $301,000, respectively. Net markups, net markdowns, and net sales for the year were $3,000, $4,000, and $280,000, respectively. The retail price index at the end of 2022 was 1.06. Estimate ending inventory in 2022 using the dollar-value LIFO retail method and the information provided.

Expert Solution

Inventory and inventory method

Inventory are the goods which are purchased but not yet sold by company. Inventory are reported in balance sheet. There are three methods available to value inventory which are FIFO method, LIFO method and average costs. Under FIFO method, goods which are purchased first are sold first and latest units purchased are held as inventory. Under LIFO method, inventory purchase latest are sold first and old goods purchased are held as inventory. Under average cost method, value of ending inventory and cost of goods sold are valued calculating average costs per unit.

Dollar value LIFO retail method

When dollar value of ending inventory is higher than the beginning inventory amount then it means LIFO layer has been added. Dollar value LIFO retail method is combination of LIFO retail method and dollar value LIFO method.

Calculate ending inventory using dollar value LIFO retail method as shown below:

Thus, ending inventory using dollar value LIFO retail costs is $59,763.

Following shows the working:

Inventory are the goods which are purchased but not yet sold by company. Inventory are reported in balance sheet.

Junaid answered 2 years ago

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