Question

Required information [The following information applies to the questions displayed below.) Alquist Company uses the retail method to estimate its ending inventory. Selected information about its year 2021 operations is as follows: a. January 1, 2021, beginning inventory had a cost of $208,000 and a retail value of $200,000. b. Purchases during 2021 cost $1,617,000 with an original retail value of $2,335,000. c. Freight costs were $15,000 for incoming merchandise. d. Net additional markups were $340,000 and net markdowns were $275,000. e. Based on prior experience, shrinkage due to shoplifting was estimated to be $20,000 of retail value. f. Merchandise is sold to employees at a 20% of selling price discount. Employee sales are recorded in a separate account at the net selling price. The balance in this account at the end of 2021 is $300,000. g. Sales to customers totaled $1,910,000 for the year. Required: 2. Estimate ending inventory and cost of goods sold using the LIFO retail method. (Assume stable prices.) LIFO Retail Method $ 295,000 Estimated ending inventory at retail Estimated ending inventory at cost Estimated cost of goods sold

Answer 1

2) Calculation of Ending inventory and cost of good sold using LIFO retail method (Amounts in $)

		Cost	Retail
Beginning Inventory		208,000	200,000
Add: Purchases		1,617,000	2,335,000
Freight in		15,000
Add: Net Markups			340,000
Less: Net Markdowns			(275,000)
Goods available for sale (excluding beg inventory)		1,632,000	2,400,000
Goods available for sales (including beg inventory)		1,840,000	2,600,000
Cost to Retail Percentage (1,632,000/2,400,000)	68%
Less: Normal Shrinkage			(20,000)
Sales:
Sales to customers	1,910,000
Sales to employees	300,000		(2,210,000)
Employee discounts (300,000/80%*20%)			(75,000)
Estimated Ending Inventory at retail			295,000
Estimated Ending Inventory at Cost (See note 1 below)		(272,600)
Estimated Cost of Goods Sold (1,840,000-272,600)		1,567,400

Note 1) Calculation of estimated ending inventory at cost: (Amounts in $)

	Retail	Cost
Beginning Inventory	200,000	208,000
Add: Current period's layer	95,000 (295,000-200,000)	64,600 (95,000*68%)
Ending Inventory	295,000	272,600