LIFO retail inventory method, stable prices. Potter Variety Store uses the LIFO
ID: 2345301 • Letter: L
Question
LIFO retail inventory method, stable prices.Potter Variety Store uses the LIFO retail inventory method. Information relating to the computation of the inventory at December 31, 2012, follows:
Cost Retail
Inventory, January 1, 2012 $146,000 $220,000
Purchases 480,000 700,000
Freight-in 80,000
Sales 750,000
Net markups 160,000
Net markdowns 60,000
Instructions
Assuming that there was no change in the price index during the year, compute the inventory at December 31, 2012, using the LIFO retail inventory method.
Answer
Explanation / Answer
At Cost At Retail Ratio Inventory, January 1, 2010 $146,000 $220,000 Purchases 480,000 700,000 Freight-in 80,000 Net markups 160,000 Net markdowns (60,000) Total (excluding beginning inventory) 560,000 800,000 70% Total (including beginning inventory) $706,000 1,020,000 Less sales 750,000 Inventory, Dec. 31, 2010, at retail $ 270000 Ending inventory $ 270,000 Beginning inventory $146,000 (220,000) Increment $ 50,000 Increment at cost ($50,000 × 70%) 35,000 Ending inventory at LIFO cost $181,000
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