Question

Shania Twains Corporation began operations on January 1, 2017, with a beginning inventory of $31,000 at cost and $50,000 at retail. The following information relates to 2017.

	Retail
Net purchases ($109,000 at cost)	$150,000
Net markups	10,000
Net markdowns	4,300
Sales revenue	126,900

Instructions

(a)  Assume Shania Twains Corporation decided to adopt the conventional retail method. Compute the ending inventory to be reported in the balance sheet.

(b)  Without prejudice to your solution in part (a), assume instead that Shania Twains Corporation decides to adopt the dollar-value LIFO retail method. The appropriate price indexes are 100 at January 1 and 110 at December 31 and the cost to retail ratio for 2017 is 70%. Compute the ending inventory to be reported in the balance sheet.

(c)  On the basis of the information in part (b), compute cost of goods sold.

Answer 1