Raleigh Department Store uses the conventional retail method for the year ended December 31, 2016. Available information follows:
a. The inventory at January 1, 2016, had a retail value of $53,000 and a cost of $36,930 based on the conventional retail method.
b. Transactions during 2016 were as follows:
Cost Retail
Gross purchases $327,870 $570,000
Purchase returns 6,700 18,000
Purchase discounts 5,800
Gross sales 568,000
Sales returns 7,500
Employee discounts 2,000
Freight-in 30,500
Net markups 33,000
Net markdowns 18,000
Sales to employees are recorded net of discounts.
c. The retail value of the December 31, 2017, inventory was $61,880, the cost-to-retail percentage for 2017 under the LIFO retail method was 70%, and the appropriate price index was 104% of the January 1, 2017, price level.
d. The retail value of the December 31, 2018, inventory was $53,500, the cost-to-retail percentage for 2018 under the LIFO retail method
was 69%, and the appropriate price index was 107% of the January 1, 2017, price level.
Required
1. Estimate ending inventory for 2016 using the conventional retail method.
2. Estimate ending inventory for 2016 assuming Raleigh Department Store used the LIFO retail method. 3. Assume Raleigh Department Store adopts the dollar-value LIFO retail method on January 1, 2017. Estimating ending inventory for 2017 and 2018.

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Raleigh Department Store uses the conventional retail method for the year ended December 31, 2016. Available information follows:
a. The inventory at January 1, 2016, had a retail value of $53,000 and a cost of $36,930 based on the conventional retail method.
b. Transactions during 2016 were as follows:
Cost Retail
Gross purchases $327,870 $570,000
Purchase returns 6,700 18,000
Purchase discounts 5,800
Gross sales 568,000
Sales returns 7,500
Employee discounts 2,000
Freight-in 30,500
Net markups 33,000
Net markdowns 18,000
Sales to employees are recorded net of discounts.
c. The retail value of the December 31, 2017, inventory was $61,880, the cost-to-retail percentage for 2017 under the LIFO retail method was 70%, and the appropriate price index was 104% of the January 1, 2017, price level.
d. The retail value of the December 31, 2018, inventory was $53,500, the cost-to-retail percentage for 2018 under the LIFO retail method
was 69%, and the appropriate price index was 107% of the January 1, 2017, price level.
Required
1. Estimate ending inventory for 2016 using the conventional retail method.
2. Estimate ending inventory for 2016 assuming Raleigh Department Store used the LIFO retail method. 3. Assume Raleigh Department Store adopts the dollar-value LIFO retail method on January 1, 2017. Estimating ending inventory for 2017 and 2018.

Answer :

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abiolataiwo2015 abiolataiwo2015 · Answer 1 · 2025-04-21T03:43:02-04:00

Answer:

1. $34,500

2. $39,845

3.$35,956

4. $34,500

Explanation:

1. Calculation to Estimate ending inventory for 2016 using the conventional retail method.

COST RETAIL

Cost-to-retail ratio

Beginning inventory $36,930$53,000

Add Purchases $327,870 $570,000

Freight-in 30500 $0

Less: Purchase returns (6,700) (18,000)

Purchase discounts ($5,800) $0

Add : Net markups $0 $33000

Total Retail $638,000

($53,000+$570,000-$18,000+$33,000=$638,000)

Less: Net markdowns $0 ($18,000)

Goods available for sale $382,800 $620,000

($36,930+$327,870+$30,500-$6,700-$5,800=$382,800)

($638,000-$18,000=$620,000)

Cost-to-retail percentage 60%

$382,800/$638,000

Less: Net sales $0 ($560,500)

(568,000-$7,500)

Employee discounts $0 ($2,000)

Estimated ending inventory at retail $0 $57,500

($620,000-$560,500-$2,000)

Estimated ending inventory at cost $34,500

(60%*$57,500)

Therefore the Estimate ending inventory for 2016 using the conventional retail method is $34,500

2. COST RETAIL

Cost-to-retail ratio

Beginning inventory $36,930$53,000

Add Purchases $327,870 $570,000

Freight-in 30500 $0

Less: Purchase returns (6,700) (18,000)

Purchase discounts ($5,800) $0

Add : Net markups $0 $33000

Less: Net markdowns $0 ($18,000)

Goods available for sale $345,870 $567,000

(excluding beg. inventory)

($327,870+$30,500-$6,700+$5,800=$345,870)

($570,000

($570,000+$33,000-$18,000-$18,000=$567,000)

Goods available for sale $382,800 $620,000

($36,930+$327,870+$30,500-$6,700-$5,800=$382,800)

($638,000-$18,000=$620,000)

Cost-to-retail percentage 61%

$345,870/ $567,000

Less: Net sales $0 ($560,500)

(568,000-$7,500)

Employee discounts $0 ($2,000)

Estimated ending inventory at retail $0 $57,500

($620,000-$560,500-$2,000)

Estimated ending inventory at cost $39,845

($53,000*70%)+(($57,500-$53,000)*61%)

($36,930/$53,000=69.7%)

=(70% Approximately)

Therefore the Estimate ending inventory for 2016 assuming Raleigh Department Store used the LIFO retail method is $39,845

3. Calculation to determine the Estimated ending inventory at cost for 2017

First step is to calculate the

Ending Inventory at Base Year Retail Prices

Ending Inventory at Base Year Retail Prices = $61,880/1.04

Ending Inventory at Base Year Retail Prices = $59,500

Now let calculate the Estimated ending inventory at cost

Estimated ending inventory at cost = ($57,500*1*60%)+((59,500-$57,500)*1.04*70%) = Estimated ending inventory at cost = $34,500+$1,456

Estimated ending inventory at cost =$35,956

Therefore the Estimated ending inventory at cost for 2020 is $35,956

4. Calculation to determine the Estimated ending inventory at cost for 2018

First step is to calculate the

Ending Inventory at Base Year Retail Prices

Ending Inventory at Base Year Retail Prices = $53,500/1.07

Ending Inventory at Base Year Retail Prices= $50,000

Now let calculate the Estimated ending inventory at cost

Estimated ending inventory at cost = $50,000*1*69%

Estimated ending inventory at cost = $34,500

Therefore the Estimated ending inventory at cost for 2018 is $34,500