On January 1, 2016, Pet Friendly Stores adopted the retail inventory method. Inv
ID: 2497073 • Letter: O
Question
On January 1, 2016, Pet Friendly Stores adopted the retail inventory method. Inventory transactions at both cost and retail, and cost indexes for 2016 and 2017 are as follows:
2016 2017
Cost Retail Cost Retail
Beginning inventory $ 90,000 $ 150,000
Purchases 478,000 730,000 $ 511,000 $ 760,000
Purchase returns 2,500 3,500 2,200 4,000
Freight-in 6,960 8,000
Net markups 8,500 10,000
Net markdowns 4,000 6,000
Net sales to customers 650,000 680,000
Sales to employees
(net of 30% discount) 14,000 17,500
Normal spoilage 5,000 6,600
Price Index:
January 1, 2016 1.00
December 31, 2016 1.03
December 31, 2017 1.06
Required: 1. Estimate the 2016 and 2017 ending inventory and cost of goods sold using the dollar-value LIFO retail method.
Explanation / Answer
Ans:
Here is what I solved before, please modify the figures as per your question. Please let me know if you have further questions.
1) Dollar value retail method
cost retail
Begining inventory $156,000 $240,000
Plus: Purchases 510,000 752,000
Freight in 6,200
less: purchase returns (6,200) (3650)
plus: net markups 6250
$994,600
goods avaialbel for sale (excuding beginning) 510,000 754,600
goods avaialble for sale ( incuding beginning) 660,000 994,600
base year cost to retail % 156,000/240,000 =65%
2016 cost to retail % 510,000/754,600 = 67.59%
less: mark downs (4600)
less: normal spoilage (6200)
goods avialable for sale $666,000 983,800
Less: Net sales (521,000)
Estiamted inventory at retail $462,800
Estiamted ending invnetory at cost $266,037
Estiamted ocst of good sold $399,963
ending inventoru at year ending inventory at inventory layesr at base
end retail prices base year retail prices yr retail prices
$462,800 $462,800/1.25 = $370,240 240,000( base *1*65%) = 156,000
130,240 *1.25 *67.59% = 110,037
Total ending inventory at dollar value LIFO retaile method $266,037
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