Sarasota Company began operations late in 2016 and adopted the conventional reta

Question

Sarasota Company began operations late in 2016 and adopted the conventional retail inventory method. Because there was no beginning inventory for 2016 and no markdowns during 2016, the ending inventory for 2016 was $11,811 under both the conventional retail method and the LIFO retail method. At the end of 2017, management wants to compare the results of applying the conventional and LIFO retail methods. There was no change in the price level during 2017. The following data are available for computations.

Cost

Retail

Compute the cost of the 2017 ending inventory under both:

(A) The conventional retial method. Ending inventory using concentional retal method $_____________ (I kept getting $20,167, which is the incorrect answer. I am unable to get the second two if this one is wrong so please help)

(B) The LIFO retail method

Ending inventory at cost $_____________ and Ending inventory at retail $_____________

Cost

Retail

Inventory, January 1, 2017 $11,811 $18,900 Sales revenue 80,000 Net markups 9,200 Net markdowns 1,500 Purchases 53,400 74,600 Freight-in 6,679 Estimated theft 1,900

Explanation / Answer

(A) Conventional Retail Method:

Cost to retail ratio = 71,800/102,700 = 0.69912 or 69.91%

Ending Inventory at Cost :

Cost to retail ratio * Estimated inventory at retail = 69.91% * 19,300 = 13,493.0867

2)

Under LIFO System:

Cost Retail Beginning 11,811 18,900 Purchase 53,400 74,600 Freight in 6,679 Mark up 9,200 Inventory after markup 71,890 1,02,700 less:markdown -1,500 Inventory after markdown 1,01,200 less:sales -80000 Estimated theft -1,900 Estimated inventory at retail 19,300

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