Question

Green Acres Co. has elected to use the dollar-value LIFO retail method to value its inventory. The following data has been accumulated from the accounting records: Cost Retail Merchandise inventory, January 1, 2018 $ 225,780 $ 355,000 Net purchases 466,550 745,000 Net markups 10,100 Net markdowns 2,600 Net sales 534,400 Pertinent retail price indexes: January 1, 2018 1.00 December 31, 2018 1.10

Required: Estimate the cost of ending inventory for December 31, 2018

Answer 1

cost Retail

inventory jan 1st 2,25,780 3,55,000
Net purchases 4,66,550 7,45,000
markups 10,100
markdowns (2,600)
sub total 4,66,550 7,52,500
cost to ratail(4,66,550/7,52,500)=62%
cost of goods   
available 6,92,330 11,07,500
for sale

net sales (5,34,400)
Ending inventory
at retail 5,73,100

so ending inventory at base year retail prices=5,73,100/1.1
=5,21,000$

inventory layes at base year retail price=
3,55,000*1*0.72=2,55,600

inventory layer converted to cost =
1,66,000*1.10*.62=1,13,212

so cost of ending inventory in LIFO =3,68,812$