Raleigh Department Store uses the conventional retail method for the year ended

Question

Raleigh Department Store uses the conventional retail method for the year ended December 31, 2016. Available information follows: The inventory at January 1, 2016, had a retail value of $51,000 and a cost of $38,060 based on the conventional retail method. Transactions during 2016 were as follows: Cost Retail Gross purchases $ 344,940 $ 550,000 Purchase returns 6,500 16,000 Purchase discounts 5,600 Gross sales 544,000 Sales returns 5,000 Employee discounts 6,000 Freight-in 29,500 Net markups 31,000 Net markdowns 16,000 Sales to employees are recorded net of discounts. The retail value of the December 31, 2017, inventory was $60,180, the cost-to-retail percentage for 2017 under the LIFO retail method was 75%, and the appropriate price index was 102% of the January 1, 2017, price level. The retail value of the December 31, 2018, inventory was $51,450, the cost-to-retail percentage for 2018 under the LIFO retail method was 74%, and the appropriate price index was 105% of the January 1, 2017, price level.

Required:

1. Estimate ending inventory for 2016 using the conventional retail method.

2. Estimate ending inventory for 2016 assuming Raleigh Department Store used the LIFO retail method.

3. Assume Raleigh Department Store adopts the dollar-value LIFO retail method on January 1, 2017. Estimating ending inventory for 2017 and 2018.

Explanation / Answer

Part 1)

The value of ending inventory with the use of conventional retail method is arrived as below:

_____

Part 2)

The value of estimated ending inventory for 2016 assuming Raleigh Department Store used the LIFO retail method is calculated as below:

_____

Notes:

The value of ending inventory for is determined as below:

_____

Part 3)

The value of estimated ending inventory for 2017 and 2018 is calculated as follows:

2017:

____

2018:

Cost Retail Cost-to-Retail Ratio Beginning Inventory 38,060 51,000 Add Purchases 344,940 550,000 Freight In 29,500 Less Purchase Returns -6,500 -16,000 Purchase Discounts -5,600 Add Net Markups 31,000 616,000 Cost to Retail Percentage (400,400/616,000*100) 65% Less Net Markdowns -16,000 Goods Available for Sale 400,400 600,000 Less Net Sales (544,000 - 5,000) -539,000 Employee Discounts -6,000 Estimated Ending Inventory at Retail 55,000 Estimated Ending Inventory at Cost (55,000*65%) $35,750

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