Question

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

Pertinent retail price indexes are as follows:

Determine ending inventory and cost of goods sold.

Cost Retail 315,000 $ 420,000 537,200 675,000 24,000 19,000 550,000 Merchandise inventory, January 1, 2016 Net purchases Net markups Net markdowns Net sales January 1, 2016 December 31, 2016 1.00 1.10 Ending inventory at retail Ending inventory at cost Cost of goods sold

Answer 1

Answer

Ending Inventory at Retail	$550,000
Ending Inventory at Cost	$384,520
Cost of Goods Sold	$467,680

--Workings

	Cost	Retail	Cost to retail %
Beginning Inventory	$315,000	$420,000	75.000%
Net Purchases	$537,200	$675,000
Net Mark ups		$24,000
Net Mark downs		($19,000)
Purchases	$537,200	$680,000	79.000%
Goods available for sale	$852,200	$1,100,000
Net Sales		($550,000)
Ending Inventory at Retail		$550,000
Ending Inventory at Cost	($384,520)
Cost of Goods Sold	$467,680

-

	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
$550,000	$500,000	$420,000	$315,000	[420000 x 75% x 1.0]
	[ 550000 / 1.1 ]	$80,000	$69,520	[80000 x 79% x 1.1]
Total ending Inventory at dollar value LIFO retail cost			$384,520