Question

Lowe uses the conventional retail method to determine its ending inventory at cost. Assume the beginning inventory at cost (retail) were $384000 ($588000), purchases during the current year at cost (retail) were $1935000 ($3180000), freight-in on these purchases totaled $123000, sales during the current year totaled $2880000, and net markups (markdowns) were $66000 ($102000). What is the ending inventory value at cost? Hint: Round intermediate calculation to 3 decimal places, e.g. 0.635 and final answer to 0 decimal places.

1. $542724.

2. $565656.

3. $621075.

4. $852000.

The following data concerning the retail inventory method are taken from the financial records of Dav Company.

		Cost		Retail
Beginning inventory		$ 204000		$ 288000
Purchases		904000		1360000
Freight-in		24800		—
Net markups		—		80800
Net markdowns		—		56800
Sales		—		1424000

If the ending inventory is to be valued at approximately the lower of cost or market, the calculation of the cost-to-retail ratio should be based on goods available for sale at (1) cost and (2) retail, respectively of

1. $1132800 and $1728800.

2. $1132800 and $1672000.

3. $1132800 and $1648000.

4. $1108000 and $1648000.

A firm uses the dollar value LIFO retail method and has $2,000 in beginning inventory at retail at the beginning of the current year. The base year equivalent of this amount is $1,600. The base year index is 1.00. The beginning inventory reported in the Balance Sheet is $800. During the current year, the firm purchased $12,000 of inventory at cost and marked that up to $40,000. Sales for the year were $28,000. The relevant ending price index is 1.60. What amount does this firm report as inventory in its Balance Sheet at the end of the current year?

1. $4,286

2. $13,440

3. $4,232

4. $4,200

Answer 1

Answer to first question in the list: Option-(1): $542,724 Reason: Under Conventional retail method, ending inventory is calculated by excluding markdowns but including markups. So, Conventional Method Cost Retail Therefore, Beginning Inventory $384,000 $588,000 Purchases $1,935,000 $3,180,000 Total Inventories at cost $2,442,000 Freight In $123,000 Retail value, in dollars $3,834,000 Purchase Returns Cost to retail % 0.637 [$2442000 / $3834000] Purchase Discounts Estimated ending inventory at retail $852,000 (Ref: Schedule] Net Markups $66,000 Estimated ending inventory at cost $542,724 ($852000 x 0.637] Estimated theft Abnormal Spoilage Total Inventories $2,442,000 $3,834,000 Net Markdowns $102,000 Goods available for sale $2,442,000 $3,732,000 Less: Normal Spoilage Employee discounts Total available for sale $3,732,000 Net Sales to customers $2,880,000 Estimated ending inventory at retail $852,000 $0