Question

Crosby Company owns a chain of hardware stores throughout the state. The company uses a periodic inventory system and the retail inventory method to estimate ending inventory and cost of goods sold. The following data are available for the three months ending March 31, 2021:
Cost Retail
Beginning inventory $ 340,000 $ 384,000
Net purchases 777,000 1,040,000
Net markups 15,000
Net markdowns 5,000
Net sales 1,005,000

Required:
Estimate the LIFO cost of ending inventory and cost of goods sold for the three months ending March 31, 20121 Assume stable retail prices during the period.

Answer 1

Answer:

Estimated ending inventory at retail                 $429000

Estimated cost of goods sold                           $699,700

Explanation:

                                                      Cost                Retail

Beginning inventory                $340,000          $384,000

Plus: Net Purchases                $777,000           $1,040,000

Net Markups                                                       $15,000

Less : Net Markdowns                                       ($5,000)

Goods available for sale        

excluding business inventory $777,000          $1,050,000

Cost to retail percentage $777,000 / $1,050,000 = 74%

Goods available for sale         $1,117,000          $1,434,000

Less : Net Sales                                                 ($1,005,000)

Estimated ending inventory at retail                 $429000

Beginning inventory              $340,000           $384,000

Current periods layer            $45000 * 74% = $33,300

Total                                       $385,000            $417,300

Estimated cost of goods sold = $1,117,000 - $417,300

= $699,700