Murdock Industries uses a periodic inventory system and the LIFO retail method t
ID: 2471328 • Letter: M
Question
Murdock Industries uses a periodic inventory system and the LIFO retail method to estimate its ending inventories. The following date has been summarized for December 31, 2016:
Cost Retail
Inventory, January 1 116,000 165,000
Purchases 355,000 540,000
Net markups 15,600
Net markdowns 9,800
Net Sales 522,000
Estimate the LIFO cost of ending inventory. Assume stable retail prices during the period.
Explanation / Answer
Cost
Retail
Inventory, January 1
$ 116,000
$ 165,000
Net Purchases
$ 355,000
$ 540,000
Net markups
$ 15,600
Net markdowns
$ (9,800)
Goods available for sale (Excluding BI)
$ 355,000
$ 545,800
Goods available for sale
$ 471,000
$ 710,800
Cost to retail percentage: $355,000 / $545,800 = 65%
Net sales
$ (522,000)
Ending Inventory: At retail
$ 188,800
Estimated Ending Inventory at cost
Retail
Cost
Beginning Inventory
$ 165,000
$ 116,000
Current period's layer: 23,800 * 65%
$ 23,800
$ 15,470
Total
$ 188,800
$ 131,470
Cost
Retail
Inventory, January 1
$ 116,000
$ 165,000
Net Purchases
$ 355,000
$ 540,000
Net markups
$ 15,600
Net markdowns
$ (9,800)
Goods available for sale (Excluding BI)
$ 355,000
$ 545,800
Goods available for sale
$ 471,000
$ 710,800
Cost to retail percentage: $355,000 / $545,800 = 65%
Net sales
$ (522,000)
Ending Inventory: At retail
$ 188,800
Estimated Ending Inventory at cost
Retail
Cost
Beginning Inventory
$ 165,000
$ 116,000
Current period's layer: 23,800 * 65%
$ 23,800
$ 15,470
Total
$ 188,800
$ 131,470
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