Question

Raleigh Department Store uses the conventional retail method for the year ended December 31, 2016. Available information follows:

1. The inventory at January 1, 2016, had a retail value of $46,000 and a cost of $29,160 based on the conventional retail method.
2. Transactions during 2016 were as follows:

	Cost			Retail
Gross purchases	$	291,540		$	500,000
Purchase returns		6,000			11,000
Purchase discounts		5,100
Gross sales					500,000
Sales returns					8,500
Employee discounts					3,500
Freight-in		27,000
Net markups					26,000
Net markdowns					11,000

Sales to employees are recorded net of discounts.

3. The retail value of the December 31, 2017, inventory was $61,800, the cost-to-retail percentage for 2017 under the LIFO retail method was 64%, and the appropriate price index was 103% of the January 1, 2017, price level.
4. The retail value of the December 31, 2018, inventory was $49,290, the cost-to-retail percentage for 2018 under the LIFO retail method was 63%, and the appropriate price index was 106% of the January 1, 2017, price level.

Required:
1. Estimate ending inventory for 2016 using the conventional retail method.
2. Estimate ending inventory for 2016 assuming Raleigh Department Store used the LIFO retail method.
3. Assume Raleigh Department Store adopts the dollar-value LIFO retail method on January 1, 2017. Estimating ending inventory for 2017 and 2018.

Complete this question by entering your answers in the tabs below.

• Required 1

Estimate ending inventory for 2016 using the conventional retail method. (Amounts to be deducted should be indicated by a minus sign.)

	Cost Retail Cost-to-Retail Ratio Beginning inventory $29,160 $46,000 Add: Purchases 291,540 500,000 Add: Freight-in 27,000 Less: Purchase returns (6,000) (11,000) Add: Net markups 26,000 Less: Purchase discounts (5,100) 561,000 Cost-to-retail percentage Goods available for sale $336,600 561,000 Estimated ending inventory at retail $561,000 Estimated ending inventory at cost

• Required 2

Estimate ending inventory for 2016 assuming Raleigh Department Store used the LIFO retail method.

	Cost Retail Cost-to-Retail Ratio Beginning inventory Add: Purchases Add: Freight-in Less: Purchase returns Add: Net markups Less: Purchase discounts Goods available for sale (excluding beginning inventory) Goods available for sale (including beginning inventory) 0 0 Cost-to-retail percentage Estimated ending inventory at retail $0 Estimated ending inventory at cost

• Required 3

Assume Raleigh Department Store adopts the dollar-value LIFO retail method on January 1, 2017. Estimating ending inventory for 2017 and 2018.

	Total ending inventory at dollar-value LIFO retail cost, 2017 Total ending inventory at dollar-value LIFO retail cost, 2018

Answer 1

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