Charleston Company has elected to use the dollar-value LIFO retail method to val

Question

Charleston Company has elected to use the dollar-value LIFO retail method to value its inventory. The following data has been accumulated from the accounting records:

Required:

Estimate the ending inventory for December 31, 2016.

Cost     Retail Merchandise inventory, January 1, 2016 $320,000 $500,000        Net purchases 670,000 1,020,000        Net markups 14,000        Net markdowns 4,000        Net sales 650,000 Pertinent retail price indexes:        January 1, 2016 1.00        December 31, 2016 1.10

Explanation / Answer

Cost Retail cost to retail

Beginning Merchandise inventory, 1st January 2016 320000 500000 64%

Purchase(net) 670000 1020000 65.7%

Net Markup 14000

Net Markdown -4000

net sales -650000   

ending inventory at retail 880000

Inventory at cost : LIFO Method   

(1020000 - 880000) = 140000 * 65.7% = $91980

500000 * 64% = $320000

   $411980

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