Question

Use the following information for questions 9 and 10. Baker Company, which uses the LIFO Retail...

Use the following information for questions 9 and 10.

Baker Company, which uses the LIFO Retail method to determine inventory cost, and has provided the following information for 2019:

            Inventory (1/1/19)……………………… (Cost $94,000)

            Net purchases……………………………(Cost $378,000)

            Net purchases……………………………(Retail $562,000)

            Inventory (1/1/19)……………………….(Retail $140,000)

            Net markups…………………………….. $68,000

            Net markdowns…………………………… $30,000

            Net sales……………………………………. $530,000

Assuming stable prices (no change in the price index during 2019), what is the cost of Baker's inventory at December 31, 2019?

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Answer #1

Answer -

Calculation of the cost of Baker's inventory at December 31, 2019

Explanation At Cost ($) At Retail ($) Ratio
Inventory, January 1, 2019 Given in question 94000 140000 -
Add: Net purchases Given in question 378000 562000 -
Add: Net markups Given in question - 68000 -
Less: Net markdowns Given in question - (30000) -
Total (excluding beginning inventory) - 378000 600000 63%
Total (including beginning inventory) - 472000 740000 -
Less: Net sales Given in question - (530000) -
-

Inventory, Dec. 31, 2019, at retail

 $740000 - $530000 - 210000 -
-
-
Ending inventory Calculated above - 210000 -
Beginning inventory Given in question 94000 (140000) -
Increment $210000 - $140000 - 70000 -
Increment at cost $70000 * 63% 44100 - -
- -

Ending inventory at LIFO cost

 $94000 + $44100 138100 - -
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