Question

Teal Company began operations on January 1, 2019, adopting the conventional retail inventory system. None of the company's merchandise was marked down in 2019 and, because there was no beginning inventory, its ending inventory for 2019 of $38,800 would have been the same under either the conventional retail system or the LIFO retail system. On December 31, 2020, the store management considers adopting the LIFO retail system and desires to know how the December 31, 2020, inventory would appear under both systems. All pertinent data regarding purchases, sales, markups, and markdowns are shown below. There has been no change in the price level. Cost Retail Inventory, Jan. 1, 2020 $38,800 $59,400 Markdowns (net) 13,300 Markups (net) 22,200 Purchases (net) 129,600 179,400 Sales (net) 164,900 Determine the cost of the 2020 ending inventory under both (a) the conventional retail method and (b) the LIFO retail method. (Round ratios for computational purposes to 2 decimal place, e.g. 78.72% and final answers to 0 decimal places, e.g. 28,987.) (a) Ending inventory using conventional retail method $ (b) Ending inventory LIFO retail method "

Answer 1

Ans:  

A). ending inventory using conventional retail method

Particulars	At cos($)	At retail($)
Beginning inventory	38,800	59,400
Purchases	129,600	179,400
Total	168,400	238,800
Add markups		22,200
		261,000
Less: markdown		(13,300)
		247,700
Sales		(164,900)
Ending inventory-retail		82,800
Ending inventory- cost ; cost to retail ratio
=168,400/261,000=64.52%
=82,800*64.52%=> 53422.56	53423

b). The LIFO retail method:

Particulars	At cost	At retail	Ratio
Beginning inventory	38,800	59,400
Purchases	129,600	179,400
Add : markups		22,200
Less: Markdowns		(13,300)
Total excluding beginning inventory	129,600	188,300	68.82%
Sales		164,900
Ending inventory-retail		23,400
Ending inventory-cost	38,800
Add: incremental at cost(23,400*68.82%)	16,104
ending inventory -LIFO Cost	54,904