Helen Keller Company began operations on January 1, 2013, adopting the conventio
ID: 2470226 • Letter: H
Question
Helen Keller Company began operations on January 1, 2013, adopting the conventional retail inventory system. None of the company’s merchandise was marked down in 2013 and, because there was no beginning inventory, its ending inventory for 2013 of $42,800 would have been the same under either the conventional retail system or the LIFO retail system.
On December 31, 2014, the store management considers adopting the LIFO retail system and desires to know how the December 31, 2014, 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
Determine the cost of the 2014 ending inventory under both (a) the conventional retail method and (b) the LIFO retail method.
Cost
Retail
Inventory, Jan. 1, 2014 $ 42,800 $ 62,200 Markdowns (net) 14,100 Markups (net) 31,500 Purchases (net) 154,000 207,600 Sales (net) 39,800Explanation / Answer
(a)
Conventional Retail Method
Cost
Retail
Inventory, January 1, 2014...........................................
$ 42,800
$ 62,200
Purchases (net)...........................................................
154,000
207,600
196,800
269,800
Add: Net markups......................................................
31,500
Totals.............................................................
$196,800
301,300
Deduct: Net markdowns.............................................
14,100
Sales price of goods available.....................................
287,200
Deduct: Sales (net).....................................................
39,800
Ending inventory at retail............................................
$ 247,400
Cost-to-retail ratio =
$196,800
= 65.32%
$301,300
Ending inventory at cost = 65.32% X $247,400 = $161,595
(b)
LIFO Retail Method
Cost
Retail
Inventory, January 1, 2011................................................
$ 42,800
$ 62,200
Net purchases..................................................................
154,000
207,600
Net markups....................................................................
31,500
Net markdowns................................................................
(14,100)
Total (excluding beginning inventory)..............................
154,000
225,000
Total (including beginning inventory)...............................
$196,800
287,200
Deduct sales (net)............................................................
39,800
Ending inventory at retail.................................................
$ 247,400
Cost-to-retail ratio =
$154,000
= 68.44%
$225,000
Computation of ending inventory at LIFO cost, 2011:
Ending Inventory at Retail Prices
Layers at Retail Prices
Cost-to-Retail Percentage
Ending Inventory at LIFO Cost
$247,400
2013 $62,200
X
68.81%*
$42,800
2014 185,200
X
68.44%
126,760
$169,560
*$42,800
(prior years cost to retail)
$62,200
(a)
Conventional Retail Method
Cost
Retail
Inventory, January 1, 2014...........................................
$ 42,800
$ 62,200
Purchases (net)...........................................................
154,000
207,600
196,800
269,800
Add: Net markups......................................................
31,500
Totals.............................................................
$196,800
301,300
Deduct: Net markdowns.............................................
14,100
Sales price of goods available.....................................
287,200
Deduct: Sales (net).....................................................
39,800
Ending inventory at retail............................................
$ 247,400
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.