Headland Inc. had beginning inventory of $12,017 at cost and $19,700 at retail.

Question

Headland Inc. had beginning inventory of $12,017 at cost and $19,700 at retail. Net purchases were $112,000 at cost and $174,400 at retail. Net markups were $9,100 net markdowns were 7,400, and sales revenue was $160,500. Assume the price level increased from 100 at the beginning of the year to 105 at year-end. Compute ending inventory at cost using the dollar-value LIFO retail method. (Round ratios for computational purposes to 1 decimal place, e.g. 78.7% and final answer to o decimal places,e.g. 28,987.)

Explanation / Answer

Computation of ending inventory using dollar value LIFO method

Cost Retail

Beginning inventory $12017 $19700

Net purchases $112000 $174400

Net markups $9100

Net markdown $7400

Goods available for sale(excluding  

beginning inventory) $112000 $176100

Goods available for sale(including

beginning inventory) $124017 $195800

base year cost to retail percentage 0.61

current year cost to retail percentage 0.63

Sales revenue ($160500)

Ending inventory at retail $35300

Ending inventory at cost $21224.

Ending inventory at retail Ending inventory at base year Inventory layer at base year Inventory layer converted to cost

$35300 $33619(35300/1.05) $19700 $12017

$13919 $9207

$21224.

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