Leonard Company began operations late in 2016 and adopted the conventional retai

Question

Leonard 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 $14,000 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 retail method. Ending inventory using the conventional retail method $___________

b: The LIFO retail method. Ending inventory at cost $_______ and Ending inventory at retail $_________

Cost

Retail

Inventory, January 1, 2017 $14,000 $20,000 Sales revenue 80,000 Net markups 9,000 Net markdowns 1,600 Purchases 58,800 81,000 Freight-in 7,500 Estimated theft 2,000

Explanation / Answer

1)conventional retail method:

cost to retail ratio = 80300/110000= .73 or 7 3%

Ending inventory at Cost : cost to retail ratio * estimaed inventory at retail'              

                    = .73*26400

                   = $ 19272

2)

under LIFO units acquired last are sold first so ending inventory are left from beginning inventory.

Cost Retail Beginning 14000 20000 Purchase 58800 81000 Freight in 7500 Mark up 9000 Inventory after markup 80300 110000 less:markdown -1600 Inventory after markdown 108400 less:sales -80000 Estimated theft -2000 Estimated inventory at retail ``26400

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