Question

Smith-Kline Company maintains inventory records at selling prices as well as at cost. For 2018, the records indicate the following data. ($ in 000s) Cost Retail Beginning Inventory $112 $160 Purchases $812 $1067 Freight- in on purch. 37 Purchase returns 1 3 Net markups 5 Net markdowns 9 net sales 923 Required: Assuming the price level increased from 1 at January 1 to 1.45 at December 31, 2018, use the dollar-value LIFO retail method to approximate cost of ending inventory at cost and costs of goods sold.

Answer 1

Ending Inventory at Retail	297
Ending Inventory at Cost	426
COGS	534
Dollar Value LIFO Retail Method
	Cost	Retail
Beginning Inventory	112	160
Purchase (Net)	812	1067
Freight In	37
Purchase Return	-1	-3
Net markups		5
Net markdown		-9
Total (Excluding Beginning inventory)	848	1060
Total (Including Beginning inventory)	960	1220
Less: Sales		923
Ending Inventory at Retail		297
Ending Inventory at Cost	426
COGS	534
Base year Cost to Retail Ratio	= 112/160	70%
Cost to Retail ratio	= 848/1060	80%
Ending Inventory at Retail	297
Ending Inventory at Cost
Ending Inventory at Base Year Price	430.65	Ending Inventory at Cost
Beginning Inventory	160	112	=160*70%
Purchase layer 2018	270.65	314	=270.65*1.45*80%