Leonard Bernstein Company began operations late in 2013 and adopted the conventi
ID: 2448642 • Letter: L
Question
Leonard Bernstein Company began operations late in 2013 and adopted the conventional retail inventory method. Because there was no beginning inventory for 2013 and no markdowns during 2013, the ending inventory for 2013 was $21,388 under both the conventional retail method and the LIFO retail method. At the end of 2014, management wants to compare the results of applying the conventional and LIFO retail methods. There was no change in the price level during 2014. The following data are available for computations.
Cost
Retail
Inventory, January 1, 2014
$21,388
$29,400
Sales revenue
78,400
Net markups
8,700
Net markdowns
2,800
Purchases
58,450
83,900
Freight-in
8,002
Estimated theft
3,100
Compute the cost of the 2014 ending inventory under both :
(a) The conventional retail method. (Round ratios for computational purposes to 0 decimal places, e.g. 78% and final answer to 0 decimal places, e.g. 28,987.)
1. WHat is the Ending Inventory using the conventional retial method ?
2. The LIFO retail method.
A.What is the Ending Inventory cost ?
B. What is the Ending Inventory at retial ?
Cost
Retail
Inventory, January 1, 2014
$21,388
$29,400
Sales revenue
78,400
Net markups
8,700
Net markdowns
2,800
Purchases
58,450
83,900
Freight-in
8,002
Estimated theft
3,100
Explanation / Answer
Cost Conventional retail method Beginning Inventory 21388 29400 Add: Purchases 58450 83900 Freight-in 8002 Total 87840 113300 Add: Net Markups 8700 87840 122000 Cost-to-retail ratio 87840/122000 0.72 72.00% Less: Net Markdowns 2800 87840 119200 Less : Estimated theft 3100 Less: Sales 78400 Ending Inventory at Retail 37700 Ending Inventory at cost = 37700*72% 27144 (Retail value* Cost ratio) ie. 27144 Cost LIFO Retail method Cost/Retail Ratio Beginning Inventory 21388 29400 72.75 Purchases 58450 83900 Freight-in 8002 Add: Net Markups 8700 Less: Net Markdowns 2800 66452 89800 74.00 Cost of goods available for sale 87840 119200 Less : Estimated theft 3100 Less: Sales 78400 Ending Inventory(LIFO ) 37700 Ending Inventory LIFO retail Cost/retail ratio 29400 72.75% 21388.5 8300 74.00% 6142 37700 27530.5 ie. 27531 Ending Inventory LIFO retail 27531 Ending Inventory at cost = 27144 Ending Inventory atConv. Retail 37700
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