Question

	2019
Account	Cost	Retail
Inv, Jan 1	$ 4,000	9,000
Purchases	11,000	19,000
Freight In	2,000
Markups		1,000
Markup Cancelations		300
Markdowns		500
Markdown Cancelations		100
Net Sales		14,000
Employee Discounts		1,500
Normal Shortage		500

1. Using the Conventional Method, what is the Cost-to-Retail Ratio for 2019?
2. Using the Conventional Method, what is the ending inventory valued at Cost for 2019?
3. Using the LIFO Retail Method, what is the Cost-to-Retail Ratio for 2019?

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Answer 1

	Conventional Method
		Cost price	Retail price
	Opening Inventory	4,000	9,000
Add	Purchases	11,000	19,000
	Freight in	2,000
	Net markups		700
	(Markups - Markup cancellations) = $1000-$300 = $700
	Total	17,000	28,700
		A	B
a.	Cost to retail ratio = A/B	59.23%
	Less: Net Markdowns = C		-400
	Total at retail = (B-C)		28,300
Less	Sales		-14000
	Employee discounts		-1500
	Normal shortage		-500
	Closing Inventory at retail		12,300
b.	Closing inventory at cost = Closing inventory at retail * cost to retail ratio		7,286

	LIFO Retail Method
		Cost price	Retail price
	Opening Inventory	not to be considered	not to be considered
Add	Purchases	11,000	19,000
	Freight in	2,000
	Net markups		700
Less	Net Markdowns = (Markdowns - Markdown cancellation)=$500-$100=$400		-400
	Total	13,000	19,300
		A	B
c.	Cost to retail ratio = A/B	67.36%