canova corp adoptde the dollar value LIFO retail method on january 1 2016 on tha
ID: 2472233 • Letter: C
Question
canova corp adoptde the dollar value LIFO retail method on january 1 2016 on that date the cost of inventory on hand was 15,000 and its retail value was 18750 information for 2016 and 2017 is as follows
date ending inventory at retail retail price index cost to retail percentage
12.31.2016 25,000 1.25 82%
12/31/2017 28,600 1.30 85
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
Cost of inventory in hand on Jan 1, 2016 = 15000
Ratail Value in hand on Jan 1 , 2016 = 18750
1) cost to retail percentage fro inventory on Jan1 , 2016 = Cost of inventory / retail value of inventory
= 15000 / 18750, =80 %
2) Inventory at end of 2016 = 25000
Retail price index = 1.25
Ending inventory at retail price deflated = = Inventory at end / retail price index
25000 / 1.25, = 20000
So, ending inventory at base layer, retail value = 20000
Since it has LIFO method, opening inventory will remain part in closing inventory as what new was purchased was sold first.thereby leaving opening inventory unsold
Also opening inventory at base layer, retail value = 18750, Cost = 15000
New Layer = ending inventory at base layer, retail value - opening inventory at base layer, retail value
= 20000 - 18750, = 1250
Now new layer at cost = New layer x retail price index x cost to retail percentage
= 1250 x 1.25 x 82 %,= 1281.25
Ending inventory at dollar value Lifo = Opening inventory at cost + New Layer at cost, =
15000+1281.25, = 16281.25
Like wise you can calculate for year ending 2017
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