Question

Required information The following information applies to the questions displayed below.) 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 $35,000 and a cost of $29.050 based on the conventional retail method. b. Transactions during 2019 were as follows: Gross purchases Purchase returns Purchase discounts Gross sales Sales returns Employee discounts Freight-in Net markups Net markdowns Cost Retail $154,9583990, eee 5,500 30,000 4,080 341,eee 5,000 4, eee 30,500 15,000 30,000 Sales to employees are recorded net of discounts. c. The retail value of the December 31, 2020. Inventory was $46,800, the cost to retail percentage for 2020 under the LIFO retail method was 80%, and the appropriate price index was 104% of the January 1, 2020. price level. d. The retail value of the December 31, 2021 Inventory was $40,660, the cost to retail percentage for 2021 under the LIFO retail method was 79%, and the appropriate price Index was 107% of the January 1, 2020. price level Prey 3 of 7 8 Next > ere to search

Answer 1

Derived Inventory at Conventional Retail Method .

Inventory valuation method - Conventional Retail Method
	Cost ($)	Retail ($)
Opening Balance	29,050	35,000
Add - Gross Purchasse	1,54,950	3,90,000
Less - Purchase Return	-5,500	-30,000
Less - Purchase Discount	-4,000
Add - Freight In	30500
Net mark Up		15,000
materils are available for sale	2,05,000	4,10,000
Less - Marked down		-30,000
materils are available for sale	2,05,000	3,80,000	a
From Sales Point - derived net Sale Number
Gross Sales Less - Sales Return-(341000-5000)		-3,36,000
Less - Employee Discount		-4,000
Total		-3,40,000	b
Inventory at Retail level		40,000	(a-b)
Inventory value at cost level derived on the basis of Cost to Retail ratio
materils are available for sale @ cost level $	2,05,000
materils are available for sale ( before markd down)$	4,10,000
Cost to Retail %	50%
Inventory at cost level =50%*$40,000=$20,000	20,000

Inventory valuation method - LIFO Retail Method
	Cost ($)	Retail ($)
Opening Balance	29,050	35,000
Add - Gross Purchasse	1,54,950	3,90,000
Less - Purchase Return	-5,500	-30,000
Less - Purchase Discount	-4,000
Add - Freight In	30500
Net mark Up		15,000
Less - Marked down		-30,000
materils are available for sale	2,05,000	3,80,000	a
Interesting calculation here is Material available
without Opening Balance	1,75,950	3,45,000
Gross Sales Less - Sales Return-(341000-5000)		-3,36,000
Less - Employee Discount		-4,000
Total		-3,40,000	b
Inventory at Retail level		40,000	(a-b)
Inventory value at cost level derived on the basis of Cost to Retail ratio
materils are available for sale @ cost level $( before Opn Bal Adjust)	1,75,950	A
materils are available for sales @ Retail level $( before Opn Bal Adjust)	3,45,000	B
Cost to Retail %	51%	(A/B)
Need to calculat Layer of Reail Invetory
	Retail ($)
Opening Balance	35,000
Closing Balance	40,000
Difference - Layer	5,000
Apply Cost of Retail Ratio on above Retail Layer -( 51% * $ 5000)	2,550
	Cos ($)
Opening Balance- Inventory	29,050
Layer as calculated above	2,550
Closing Balance- Inventory	31,600

Inventory level 31st Dec 2020 $	46,800
Cost of Retail Ratio	80%
Appropriate Price Index	104%
Inventory level 31st Dec 2021 $	40,660
Cost of Retail Ratio	79%
Appropriate Price Index	107%
Ending Inventory of $ LIFO - Retail Method	Amnt($)
Inventory level 31st Dec 2020 $	46,800
Now we ned to derived base value with price Index 104%	45,000
$ 46800/1.04
Inventory balance already calculated above	40,000
Other Base year Inventory value]	5,000
Cost to determined on the basis of Layer
Base Inventory Layer convert into cost
Base of 31st Dec 2020 - $ 5000*80%*1.04	4,160	a
Inventory balance already calculated above -$40000*1*79%	31,600	b
Ending Inventory of $ LIFO - Retail Method	35,760	(a+b)

Inventory level 31st Dec 2021 $	40,660
Cost of Retail Ratio	79%
Appropriate Price Index	107%
Ending Inventory of $ LIFO - Retail Cost	Amnt($)
Inventory level 31st Dec 2021 $	40,660
Now we ned to derived base value with price Index 104%	38,000
$ 46800/1.07
Base Value - Inventiry layers	38,000
Cost to determined on the basis of Layer
Base Inventory Layer convert into cost
Inventory balance already calculated above -$38000*1*79%	30,020	b
Ending Inventory of $ LIFO - Retail Cost	30,020	(a+b)