Answer:
Estimated ending inventory at cost is $119,846.
Explanation:
This can be estimated using the following steps:
Step 1: Calculation of cost to retail ratio
This can be calculated as follows:
Net purchases at cost = $385,560
Adjusted net purchase at retail price = Net purchases at retail price + Net markups - Net markdowns = $560,000 + $34,000 - $54,000 = $540,000
Cost to retail ratio = Net purchases at cost / Adjusted net purchase at retail price = $385,560 / $540,000 = 0.7140, or 71.4%
Step 2: Calculation of LIFO layer
Ending inventory at retails price = Adjusted net purchase at retail price + Beginning inventory - Net sales = $540,000 + $118,000 - $501,000 = $157,000
LIFO layer = Ending inventory at retails price - Beginning inventory = $157,000 - $118,000 = $39,000
Step 3: Estimation of ending inventory at cost
Ending inventory at cost = Beginning inventory at cost + (LIFO layer * Cost to retail ratio) = $92,000 + ($39,000 * 71.4%) = $119,846
Therefore, estimated ending inventory at cost is $119,846.
