Smith-Kline Company maintains inventory records at selling prices as well as at

Question

Smith-Kline Company maintains inventory records at selling prices as well as at cost. For 2018, the records indicate the following data:

Required:
Assuming the price level increased from 1 at January 1 to 1.20 at December 31, 2018, use the dollar-value LIFO retail method to approximate cost of ending inventory and cost of goods sold. (Do not round intermediate calculations. Round final answers to the nearest whole dollar. Enter your answers in thousands.)

($ in 000s) Cost Retail Beginning inventory $ 81 $ 135 Purchases 575 1,015 Freight-in on purchases 32 Purchase returns 1 1 Net markups 3 Net markdowns 7 Net sales 918

Explanation / Answer

Solution: Calculation of cost of ending inventory:

Particulars cost($ in 000s) Retail($ in 000s) Beginning Inventory 81 135 Add: purchases 575 1,015 Freight In 32 Net markups 3 Less: Purchase return (1) (1) Net markdowns (7) Goods available for sale (excluding beginning Inventory) 606 1,010 Goods available for sale (including beginning Inventory) 687 1,145 Base layer cost to retail percentage(81*100/135=60%) 2018 layer cost to retail percentage(606*100/1010= 60%) Less: Net sales (918) Estimated ending inventory at current year retail prices 227 Estimated ending inventory at cost(given below) (103) Estimated cost of goods sold 584

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