Western Company, which uses the retail LIFO method to determine inventory cost,

Question

Western Company, which uses the retail LIFO method to determine inventory cost, has provided the following information for 2018:

                                                                                    Cost                       Retail  

            Inventory, 1/1/18                                         $ 125,750               $225,000

            Net purchases                                               363,280                 650,000

            Net markups                                                                                  55,000

            Net markdowns                                                                              35,000

            Net sales                                                                                     530,000

            What is the cost of Western's inventory at December 31, 2018?

Explanation / Answer

Calculate ending inventory :

Ending inventory = (225000*55.89%+140000*54.64%) = 202248.50 or 202249

Cost Retail Inventory 1/1/18   (125750/225000)= 55.89% 125750 225000 Net purchase 363280 650000 Add: Net markups 55000 Less: Net markdowns (35000) Goods available for sale 489030 895000 Ratio (489030/895000)= 54.64% Less; Net sales (530000) Ending inventory 365000

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