Vaughn Company began operations on January 1, 2019, adopting the
conventional retail inventory system. None of the company’s
merchandise was marked down in 2019 and, because there was no
beginning inventory, its ending inventory for 2019 of $38,600 would
have been the same under either the conventional retail system or
the LIFO retail system.
On December 31, 2020, the store management considers adopting the
LIFO retail system and desires to know how the December 31, 2020,
inventory would appear under both systems. All pertinent data
regarding purchases, sales, markups, and markdowns are shown below.
There has been no change in the price level.
Cost |
Retail |
|||||
---|---|---|---|---|---|---|
Inventory, Jan. 1, 2020 |
$38,600 | $59,000 | ||||
Markdowns (net) |
12,900 | |||||
Markups (net) |
22,300 | |||||
Purchases (net) |
129,700 | 175,800 | ||||
Sales (net) |
166,000 |
Determine the cost of the 2020 ending inventory under both (a) the
conventional retail method and (b) the LIFO retail method.
(Round ratios for computational purposes to 2 decimal
place, e.g. 78.72% and final answers to 0 decimal places, e.g.
28,987.)
(a) |
Ending inventory using conventional retail method |
$enter a dollar amount rounded to 0 decimal places |
||
---|---|---|---|---|
(b) |
Ending inventory LIFO retail method |
$enter a dollar amount rounded to 0 decimal places |
a) Ending inventory using conventional retail method | $ 53,895 | |||
b) Ending inventory LIFO retail method | $ 52,986 | |||
a) | ||||
Cost | Retail | Cost-to-Retail Ratio | ||
Beginning inventory | $ 38,600.00 | $ 59,000.00 | ||
Plus: Purchases | $ 129,700.00 | $ 175,800.00 | ||
Net markups | $ 22,300.00 | |||
$ 257,100.00 | ||||
Less: Net markdowns | $ (12,900.00) | |||
Goods available for sale | $ 168,300.00 | $ 244,200.00 | ||
Cost-to-retail percentage (168,300/$244,200) | 68.92% | |||
Less: Net Sales | $ 166,000.00 | |||
Estimated ending inventory at retail | $ 78,200.00 | |||
Estimated ending inventory at cost (78200 x 68.92%) | $ 53,894.59 | |||
Estimated cost of goods sold | $ 114,405.41 | |||
b) | ||||
Cost | Retail | |||
Beginning inventory | $38,600 | $59,000 | ||
Add:Net purchases | $ 129,700.00 | $ 175,800.00 | ||
Add:Net markups | $ 22,300.00 | |||
less: Net markdowns | $ (12,900.00) | |||
Goods available for sale (excluding beginning inventory) | $ 129,700.00 | $ 185,200.00 | ||
Goods available for sale (including beginning inventory) | $168,300 | $244,200 | ||
Less: Net sales | $ (166,000.00) | |||
Estimated ending inventory at retail | $78,200 | |||
Estimated ending inventory at cost (calculated below) | $52,986.39 | |||
Estimated cost of goods sold | $102,996.40 | |||
The cost-to-retail ratio under LIFO for 2020 can be computed as follows: | ||||
Base layer cost to retail % = 129700/185200 | 70.03% | |||
2020 layer cost to retail % = 38600/59000 | 65.42% | |||
Beginning inventory (Retail) | $38,600 | 65.42% | $25,254 | |
Increment in 2020(above)(78200 - 38600) | $39,600 | 70.03% | $27,733 | |
Ending inventory | $78,200 | $52,986 | ||
Vaughn Company began operations on January 1, 2019, adopting the conventional retail inventory system. None of...
Vaughn Company began operations on January 1, 2019, adopting the conventional retail inventory system. None of the company’s merchandise was marked down in 2019 and, because there was no beginning inventory, its ending inventory for 2019 of $38,600 would have been the same under either the conventional retail system or the LIFO retail system. On December 31, 2020, the store management considers adopting the LIFO retail system and desires to know how the December 31, 2020, inventory would appear under...
Vaughn Company began operations on January 1, 2019, adopting the conventional retail inventory system. None of the company’s merchandise was marked down in 2019 and, because there was no beginning inventory, its ending inventory for 2019 of $38,600 would have been the same under either the conventional retail system or the LIFO retail system. On December 31, 2020, the store management considers adopting the LIFO retail system and desires to know how the December 31, 2020, inventory would appear under...
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