Question

LIFO retail inventory method, stable prices.

Answer 1

Answer:

The correct answer is $181,000.

Explanation:

According to the scenario, the computation of the given data are as follows:

                                                         Cost                Retail

Beginning inventory               $146,000  $220,000

Purchases                                 $480,000  $700,000

Freight-in                                 $80,000  

Net markups                                                     $160,000

Net markdowns                                              $(60,000)

So,  first we calculate Total cost with excluding beginning inventory and after including inventory, then

Total (exclu. begin. inventory)       $560,000    70% $800,000

Total (inclu. begin. inventory)  $706,000  $1,020,000

Now, Less sales from the amount, we get

Sales                                                              ($750,000)

So, Ending inventory                                          $270,000

So, Ending Inventory by LIFO can be calculated as follows:

Ending inventory $ 270,000

Beginning inventory $146,000 (220,000)

Let, Increment =  $50,000

So, Increment cost =  ($50,000 × 70%)  = $35,000

Ending inventory can be calculated by using following formula:

Ending inventory = Beginning inventory + Increment cost

By putting the value, we get,

Ending inventory = $146,000 + $35,000

= $181,000

Hence, Ending inventory cost by LIFO retail inventory method is $181,000.