Question

Raleigh Department Store uses the conventional retail method for the year ended December 31, 2019. Available information follows:

1. The inventory at January 1, 2019, had a retail value of $43,000 and a cost of $33,210 based on the conventional retail method.
2. Transactions during 2019 were as follows:

	Cost			Retail
Gross purchases	$	249,510		$	470,000
Purchase returns		6,300			22,000
Purchase discounts		4,800
Gross sales					446,500
Sales returns					8,000
Employee discounts					4,500
Freight-in		26,500
Net markups					23,000
Net markdowns					22,000

Sales to employees are recorded net of discounts.

3. The retail value of the December 31, 2020, inventory was $55,080, the cost-to-retail percentage for 2020 under the LIFO retail method was 76%, and the appropriate price index was 102% of the January 1, 2020, price level.
4. The retail value of the December 31, 2021, inventory was $47,250, the cost-to-retail percentage for 2021 under the LIFO retail method was 75%, and the appropriate price index was 105% of the January 1, 2020, price level.

Required: 2. Estimate ending inventory for 2019 assuming Raleigh Department Store used the LIFO retail method. (Amounts to be deducted should be indicated with a minus sign.) Cost Cost-to-Retail Ratio Beginning inventory Goods available for sale (excluding beginning inventory) Goods available for sale (including beginning inventory) Cost-to-retail percentage Less: Net sales Sales Sales returns Employee discounts Estimated ending inventory at retail Estimated ending inventory at cost $ 0

Answer 1

ANSWER

2.) LIFO retail method

	($) Cost	($) Retail
Beginning inventory	33,210	43,000
Plus purchases	249,510	470,000
Freight in	26,500
Less: purchase returns	-6,300	-22,000
Purchase discount	-4,800
Plus: net marks up		+23,000
Less: net mark downs		-22,000
Goods available for sale (excluding beginning inventory)(298,120 -33,210) (492,000-43,000)	264,910	449,000
Goods available for sale (Including beginning inventory)	298,120	492,000
Cost to retail ratio			(264,910/449,000) *100=59%
Less: net sales
Sales	446,500
Sales return	8,000	-438,500
Employee discount		-4,500
Estimated ending inventory at retail		$49,000
Estimated ending inventory at cost [ 33,210 +(49,000 -43,000)*59%]	$36,750

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