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You assemble the following information for Swifty Department Store, which computes its inventory under the dollar-value...

You assemble the following information for Swifty Department Store, which computes its inventory under the dollar-value LIFO method. Cost Retail Inventory on January 1, 2017 $217,008 $301,400 Purchases 360,450 480,600 Increase in price level for year 9% Compute the cost of the inventory on December 31, 2017, assuming that the inventory at retail is (a) $292,100 and (b) $358,610

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Answer #2
cost $ Retail $ Ratio cost/retail
inventory on jan 1st    2,17,008    3,01,400 72%
Purchases 360,450 480,600 75%
increase in price level for year 9%

a)inventory=$292,100

with 9% price level

base inventory on 1/1/17=292,100/1.09=$268,900

this is less than the retail opening inventory $301,400

so there is LIFO liquidation

inventory at cost=$268,900*72%=$1,93,608

b)inventory=$358,610

with 9% price level

base inventory on 1/1/17=$358,610/1.09=$329,000

there is an increase of ($329,000-$301,400) $27,600

NEW Layer at retail=$27,600*1.09=$30,084

New layer at cost=$30,084*75%=22,563

Add:Base layer=$217,008

Total =$22,563+$217,008=$239,571

answered by: anonymous
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