Question

Raleigh Department Store uses the conventional retail method for the year ended December 31, 2019. Available information follows: The inventory at January 1, 2019, had a retail value of $43,000 and a cost of $33,210 based on the conventional retail method. Transactions during 2019 were as follows: Cost Retail Gross purchases $ 249,510 $ 470,000 Purchase returns 6,300 22,000 Purchase discounts 4,800 Gross sales 446,500 Sales returns 8,000 Employee discounts 4,500 Freight-in 26,500 Net markups 23,000 Net markdowns 22,000 Sales to employees are recorded net of discounts. The retail value of the December 31, 2020, inventory was $55,080, the cost-to-retail percentage for 2020 under the LIFO retail method was 76%, and the appropriate price index was 102% of the January 1, 2020, price level. The retail value of the December 31, 2021, inventory was $47,250, the cost-to-retail percentage for 2021 under the LIFO retail method was 75%, and the appropriate price index was 105% of the January 1, 2020, price level. Required: 2. Estimate ending inventory for 2019 assuming Raleigh Department Store used the LIFO retail method. (Amounts to be deducted should be indicated with a minus sign.)

Answer 1

Answer:

$36,750

Explanation:

Calculation to estimate the ending inventory for 2019 assuming Raleigh Department Store used the LIFO retail method

LIFO retail method

($) Cost ($) Retail

Beginning inventory $33,210 $43,000

Add purchases $249,510 $470,000

Freight in $26,500 $0

Less: purchase returns ($6,300) ($22,000)

Purchase discount ($4,800) $0

Add net marks up $0 23,000

Less: net mark downs $0 ($22,000)

Goods available for sale (excluding beginning inventory) $264,910 $449,000

(298,120 -33,210=264,910)

(492,000-43,000=449,000)

Goods available for sale (Including beginning inventory) $298,120 $492,000

Cost to retail ratio 59%

[(264,910/449,000) *100]

Less: net sales

Sales $446,500 $0

Sales return $8,000 ($438,500)

($446,500-$438,500=$8,000)

Employee discount $0 ($4,500)

Estimated ending inventory at retail $0 $49,000

Estimated ending inventory at cost $36,750

[ 33,210 +(49,000 -43,000)*59%]

Therefore the Estimated ending inventory at cost is $36,750