Intermediate Accounting I 4a 3

Question 1 (E 9-19)

  Cost Retail
Beginning inventory 71280 132000
Add: net purchases 112500 255000
Add: net markups   6000
Less: net markdowns   (11000)
Goods available for sale (excluding beginning inventory) 112500 250,000
Goods available for sale (including beginning inventory) 183,780 382,000
Less: net sales 0 (232,000)
Estimated ending inventory at retail   $150,000
Estimated ending inventory at cost (below) $77,004  
Estimated cost of goods sold $106,776  

 

Note

Cost to retail ratio (base year) = 71280/132000= 54%

Cost to retail ratio (2011) = 112500/250000 = 45%

Ending inventory at year-end retail prices = $150,000

Ending inventory at base year retail prices = $150,000/1.04 =$144,230.77

Inventory layers converted to cost

$132,000*1.00*54% = $71280

$12,230.77*1.04*45% = $5724

Total ending inventory at dollar-value LIFO retail cost =  $71280+$5724= $77,004

 

 

 

Question 2 (E 9-21)

  Cost Retail
Merchandise  inventory, January 1, 2011 160000 250,000
Add: net purchases 350,200 510,000
Add: net markups   7000
Less: net markdowns   (2000)
Goods available for sale (excluding beginning inventory) 160,000 515,000
Goods available for sale (including beginning inventory) 510,200 765,000
Less: net sales 0 (380,000)
Estimated ending inventory at retail   $385,000
Estimated ending inventory at cost (below) $194,177  
Estimated cost of goods sold $316,023  

 

Note

Cost to retail ratio (base year) = 160000/250000= 64%

Cost to retail ratio (2011) = 160000/515000 = 31.07%

Ending inventory at year-end retail prices = $385,000

Ending inventory at base year retail prices = $385,000/1.10 =$350,000

Inventory layers converted to cost

$250,000*1.00*0.64 = $160,000

$100,000*1.10*0.3107% = $34,177

Total ending inventory at dollar-value LIFO retail cost = $160,000 + $34,177= $194,177

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