Question

Raleigh Department Store uses the conventional retail method for the year ended December 31, 2019. Available information follows: a. The inventory at January 1, 2019, had a retail value of $40,000 and a cost of $31,650 based on the conventional retail method. b. Transactions during 2019 were as follows: Cost $212,100 6,000 4,500 Retail $440,000 25,000 Gross purchases Purchase returns Purchase discounts Gross sales Sales returns Employee discounts Freight-in Net markups Net markdowns 361,500 10,000 6,000 28,000 20,000 25,000 Sales to employees are recorded net of discounts. c. The retail value of the December 31, 2020, inventory was $101,325, the cost-to-retail percentage for 2020 under the LIFO retail method was 67%, and the appropriate price index was 105% of the January 1, 2020, price level. d. The retail value of the December 31, 2021, inventory was $46,980, the cost-to-retail percentage for 2021 under the LIFO retail method was 66%, and the appropriate price index was 108% of the January 1, 2020, price level.

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Answer 1

Solution Cost Retail Cost-to-Retail Ratio $40,000 $440,000 Beginning inventory Add: Purchases Add: Freight-in Less: Purchase returns Less: Purchase discounts Add: Net markups Less: Net markdowns Goods available for sale (excluding beginning inventory) Goods available for sale (including beginning inventory) $31,650 $212,100 $28,000 ($6,000) ($4,500) ($25,000) $229,600 $261,250 $20,000 ($25,000) $410,000 $450,000 Cost-to-retail percentage 56% Less: Net sales Sales Sales returns Employee discounts Estimated ending inventory at retail Estimated ending inventory at cost ($361,500) $10,000 ($6,000) ($357,500) $92,500 $61,050 WN-1: Calculation of estimated inventory at cost $31,650 + ($92,500 - $40,000) x 56% = $61,050