Under your guidance, as of January 1, 2012, the Little Corner Sporting Goods Sto
ID: 2464758 • Letter: U
Question
Under your guidance, as of January 1, 2012, the Little Corner Sporting Goods Store installed the retail method of accounting for its merchandise inventory.
When you undertook the preparation of the store’s financial statements at June 30, 2012, the following data were available:
At Cost
At Retail
Inventory, January 1
$26,900
$40,000
Net Markdowns
4,000
Net Markups
15,000
Net Purchases
84,700
110,000
Net Sales
116,000
REQUIRED:
Prepare a schedule to compute the June 30, 2012 inventory under the dollar-value LIFO method, assuming a general price level increase from 100 at January 1, 2012 to 105 at June 30, 2012.
At Cost
At Retail
Inventory, January 1
$26,900
$40,000
Net Markdowns
4,000
Net Markups
15,000
Net Purchases
84,700
110,000
Net Sales
116,000
Explanation / Answer
At Cost At Retail Cost to retail ratio Inventory, January 1 $26,900 $40,000 Net Markdowns -4,000 Net Markups 15,000 Net Purchases 84,700 110,000 Total excluding beginning Inventory 84,700 121,000 0.70 84700/121000 Goods available 111,600 161,000 Less: Sales -116,000 Ending Inventory 45,000 Ending Inventory deflated($45000/1.05) 42857 Base Inventory 26900 40000 Layer added 2857 New layer at the end of the year (2857*1.05*.70) 2099.9 Estimated Invetory at $ value,LIFO 29000 round off Ans
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