Question

Whispering Company began operations on January 1, 2019, adopting the conventional retail inventory system. None of the company's merchand ise was marked down in 2019 and, because there was no beginning inventory, its ending inventory for 2019 of $37,500 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. Retail Cost $59,600 $37,500 Inventory, Jan. 1, 2020 Markdowns (net) 13,000 Markups (net) 21,700 Purchases (net) 175,600 128,400 Sales (net) 170,100 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, eg. 78.72% and final answers to 0 decimal places, e.g. 28,987.) $ (a) Ending inventory using conventional retail method 47660.04 $ (b) Ending inventory LIFO retail method

Answer 1

Solution Cost price I Retail price 37500 59600 Beginning Inventory purchases Net Markups 128400 175600 21700 Totale 165900 256900 cost to retail sratio = 165900 / 256900 = 64.57% Retail price total 256900 Lessi Net Markdowns 13000 243900 170100 Total goods at retail Less: sales Ending Inventory at retail 73800 Endeng Inventory at costs = 73800 X 64.57% 47653 =

Cost price Retall parece purchases 128400 175600 Net Markup 21700 Net Markdowns (13000) Totale 128400 184300 Cost to retall ratio = 128400/184300 = 69.66% Retail price total 184300 59600 243900 Adde Beginning Inventory Total goods at retail Less: falez Endeng Invertory at retall LIFO Layer added 170100 73800 14200 | ( 13800 - 59600) Endeng Inventory at costs = Beginning Inventory at cost + LIFO Layer at cost = 37500 + (14200X 69.660%) = 37500 + 9892 47392