Question

On January 1, 2018, the Coldstone Corporation adopted the dollar-value LIFO retail inventory method. Beginning inventory at cost and at retail were $170,000 and $273,000, respectively. Net purchases during the year at cost and at retail were $719,200 and $890,000, respectively. Markups during the year were $9,000. There were no markdowns. Net sales for 2018 were $844,400. The retail price index at the end of 2018 was 1.05. What is the inventory balance that Coldstone would report in its 12/31/2018 balance sheet? (Do not round intermediate calculations.)

Answer 1

Answer

• Correct Answer
  The inventory balance that Coldstone would report in its 12/31/2018 balance sheet = $ 202,760
• Working

	Cost	Retail	Cost to retail %
Beginning Inventory	$170,000	$273,000	62.271%
Net Purchases	$719,200	$890,000
Net Mark ups		$9,000
Net Mark downs		$0
Purchases	$719,200	$899,000	80.000%
Goods available for sale	$889,200	$1,172,000
Net Sales		($844,400)
Ending Inventory at Retail		$327,600 [see Step 1, 2 and 3 now]
Ending Inventory at Cost	($202,760) = Answer [See Step 3 below]

	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
$327,600	$312,000	$273,000	$170,000	[273000 x 1.00 x 62.271%]
	[ 327600 / 1.05 ]	$39,000	$32,760	[39000 x 1.05 x 80%]
Total ending Inventory at dollar value LIFO retail cost			$202,760	= ANSWER