Question

# Bonita Department Store converted from the conventional retail method to the LIFO retail method on January...

Bonita Department Store converted from the conventional retail method to the LIFO retail method on January 1, 2017, and is now considering converting to the dollar-value LIFO inventory method. During your examination of the financial statements for the year ended December 31, 2018, management requested that you furnish a summary showing certain computations of inventory cost for the past 3 years. Here is the available information. 1. The inventory at January 1, 2016, had a retail value of \$56,800 and cost of \$29,300 based on the conventional retail method. 2. Transactions during 2016 were as follows. Cost Retail Purchases \$325,314 \$556,400 Purchase returns 5,100 10,000 Purchase discounts 5,900 Gross sales revenue (after employee discounts) 546,100 Sales returns 8,800 Employee discounts 3,100 Freight-in 17,900 Net markups 20,100 Net markdowns 12,100 3. The retail value of the December 31, 2017, inventory was \$74,500, the cost ratio for 2017 under the LIFO retail method was 63%, and the regional price index was 104% of the January 1, 2017, price level. 4. The retail value of the December 31, 2018, inventory was \$61,700, the cost ratio for 2018 under the LIFO retail method was 62%, and the regional price index was 107% of the January 1, 2017, price level. Collapse question part (a) Compute the cost of inventory on hand at December 31, 2016, based on the conventional retail method

 particulars cost retail beginning inventory 29300 56800 purchase 325314 556400 add . freight in 17900 less. purchase return -5100 -10000 purchase discount -5900 total 361514 603720 add net markup 20100 605720 less . net markdown -20100 sales price is goods available 603710 net sales 546100 - 8800 -537300 less employee discount -3100 end inventory 63310

cost of retail ratio = 361514 / 603720

= 59 %

ending invertory = 63310 * 59 %

=37353

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