On December 31, 2017, the store management considers adopting the LIFO retail sy

Question

On December 31, 2017, the store management considers adopting the LIFO retail system and desires to know how the December 31, 2017, 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 Inventory, Jan. 1, 2017 $38,300 $60,200 Markdowns (net) 12,700 Markups (net) 22,100 Purchases (net) 128,800 181,200 Sales (net) 169,500 Determine the cost of the 2017 ending inventory under both (a) the conventional retail method and (b) the LIFO retail method. (Round ratios for computational purposes to 2 decimal place, e.g. 78.72% and final answers to 0 decimal places, e.g. 28,987.) (a) Ending inventory using conventional retail method $ (b) Ending inventory LIFO retail method

Explanation / Answer

a)Ending inventory using conventional retail method

Ending inventory at cost : Ending inventory at retail *5

               = 81300 *.6342

               = $ 51560

b)

Ending inventory LIFO retail method

Ending inventory at cost under LIFO :under LIFO units acquired last are sold first ,so ending inventory are left out of initial balance

Cost Retail cost to retail ratio Beginning inventory 38300 60200 purchase 128800 181200 Markup 22100 Inventory after markup 167100 263500 167100/263500=.6342 or 63.42% markdown (12700) Inventory afer markdown 250800 sales (169500) Ending inventory at retail 81300

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