Canova Corporation adopted the dollar-value LIFO retail method on January 1, 201

Question

Canova Corporation adopted the dollar-value LIFO retail method on January 1, 2016. On that date, the cost of the inventory on hand was $30,000 and its retail value was $37,500. Information for 2016 and 2017 is as follows: Ending Inventory Retail Cost-to-Retail Date at Retail Price Index Percentage 12/31/16 $ 50,000 1.25 84 % 12/31/17 58,500 1.30 87 Required: 1. What is the cost-to-retail percentage for the inventory on hand at 1/1/16? 2. Calculate the inventory value at the end of 2016 and 2017 using the dollar-value LIFO retail method.

Explanation / Answer

1.

Calculate the cost to retail percentage for the inventory on hand at 01/01/16:

= Cost / Retail price

= $30,000 / $37,500

= 0.80 or 80%

Therefore, cost to retail percentage for the inventory on hand at 01/01/16 is 80%.

2.

Calculate the inventory value at the end of 2016 and 2017 using the dollar-value LIFO retail method:

Ending inventory value of 2016:

= $50,000 *1.25*84%

=$52,500

Therefore, ending inventory of 2016 using LIFO retail method is $52,500.

Ending inventory value of 2017:

= $58,500 * 1.30 *87%

= $66,163.50

Therefore, ending inventory of 2017 using LIFO retail method is $66,163.50.

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