Question

Lance-Hefner Specialty Shoppes decided to use the dollar-value LIFO retail method to value its inventory. Accounting records provide the following information:

	Cost			Retail
Merchandise inventory, January 1, 2018	$	198,000		$	300,000
Net purchases		385,000			545,000
Net markups					11,000
Net markdowns					6,000
Net sales					430,000

Related retail price indexes are as follows:

January 1, 2018	1.00
December 31, 2018	1.20

Required:
Determine ending inventory and cost of goods sold.

	Ending inventory at retail Ending inventory at cost Cost of goods sold

Answer 1

Answers

Ending Inventory at Retail	$420,000
Ending Inventory at Cost	$240,000
Cost of Goods Sold	$343,000

--Working

	Cost	Retail	Cost to retail %
Beginning Inventory	$198,000	$300,000	66.000%	1
Net Purchases	$385,000	$545,000
Net Mark ups		$11,000
Net Mark downs		($6,000)
Purchases	$385,000	$550,000	70.000%	1.2
Goods available for sale	$583,000	$850,000
Net Sales		($430,000)
Ending Inventory at Retail		$420,000
Ending Inventory at Cost	($240,000)
Cost of Goods Sold	$343,000

	Step 1	Step 2	Step 3
Ending Inventory at Year end retail prices	Ending Inventory at Year end BASE YEAR retail prices	Inventory Layer at base year retail prices	Inventory Layers converted to cost
$420,000	$350,000	$300,000	$198,000	[300000 x 66% x 1.00]
	[ 420000 / 1.2 ]	$50,000	$42,000	[50000 x 70% x 1.20]
Total ending Inventory at dollar value LIFO retail cost			$240,000