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Kelcie Sports uses the dollar-value LIFO retail method. The price index on January 1, 2016, was...

Kelcie Sports uses the dollar-value LIFO retail method. The price index on January 1, 2016, was 100, and on that date the inventory was $20,000 (retail) and $14,000 (cost). Additional information follows: 2016 2017 Purchases, retail $160,000 $204,000 Purchases, cost 115,200 150,960 Sales 160,416 202,160 Price index, Dec. 31. 102 103 What is the cost of the December 31, 2017, inventory (to the nearest dollar)? a. $14,610 b. $14,638 c. $14,660 d. $15,854

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Answer #1

cost Retail

Beginning 14000 20000

cost to retail ratio =14000/20000=.70

Purchase 115200 160000

Ratio = 115200/160000= .72

Ending inventory = 20000 + 160000 - 160416 = 19584

19584/1.02=19200 at base year price

cost = 19200* 0.70 = 13440

**all of the inventory left from beginning inventory at 2016 since under LIFO unit acquired last are sold first

2017

Purchase 150960 204000

Ratio = 150960 / 204000 = .74

Ending inventory = 19584 + 204000 - 202160 = 21424

21424/1.03=20800 at base year price

Cost of the December 31, 2017, inventory = 19200* 0.70 + 1648 * 0.74

= 13440 + 1220

= $14660

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