Question

Exercise 1 (Blue Cow): On January 1, 2018, the Blue Cow Corporation adopted the dollarvalue LIFO retail inventory method. Beginning inventory at cost and at retail were $180,000 and $278,250, respectively. Net purchases during the year at cost and at retail were $735,200 and $907,000, respectively. Markups during the year were $12,000. There were no markdowns. Net sales for 2018 were $866,500. The retail price index at the end of 2018 was 1.08. What is the inventory balance that Blue Cow Corporation would report in its 12/31/2018 balance sheet?

Answer 1

Particular	Cost	Retail
Beginning inventory(180000/278250=0.6469)	180000	278250
Net purchase	735200	907000
Add: net markup		12000
Total(exclude begin inventory)	735200	919000
Ratio of cost to retail(735200/919000=0.80)		0.8
Total (including beginning inventory)	915200	1197250
Less: net sale		866500
Ending inventory at retail		330750

Ending inventory retail price	Layer at retail price	Cost to retail	Ending inventory LIFO cost
330750	278250	0.6469	179999.9
	52500	0.8	42000
Ending inventory at LIFO cost (Total)			222000