On January 1, 2016, HGC Camera Store adopted the dollar-value LIFO retail invent

Question

On January 1, 2016, HGC Camera Store adopted the dollar-value LIFO retail inventory method. Inventory transactions at both cost and retail, and cost indexes for 2016 and 2017 are as follows: 2016 2017 Cost Retail Cost Retail $ 57,000 $ 76,000 Beginning inventory Net purchases Freight-in Net markups Net markdowns Net sales to customers Sales to employees (net of 10% discount) Price Index: 109,160 126,000 $115,150 $132,400 3,800 4,300 19,000 3,800 124,460 4,500 11,600 4,000 120,440 5,850 January 1, 2016 December 31, 2016 December 31, 2017 1.00 1.07 1.12 Required: Estimate the 2016 and 2017 ending inventory and cost of goods sold using the dollar-value LIFO retail inventory method. (Round your cost-to-retail percentage calculations to 2 decimal places.) 2016 2017 Estimated ending inventory at retail Estimated ending inventory at cost Estimated cost of goods sold

Explanation / Answer

2016:

Ending inventory at base year retail prices =87740/1.07=82000

Inventory layers converted to cost = (76000*1*75%)+(6000*1.07*80%)=62136

2017

Ending inventory at base year retail prices =100800/1.12=90000

Inventory layers converted to cost =(76000*1*75%)+(6000*1.07*80%)+(8000*1.12*85.32%)=69781

Cost retail Beginning inventory 57000 76000 Plus: Net Purchases 109160 126000 Freight in 3800 Net markups 19000 Less: Net markdowns (3800) Goods available for sale (excluding beginning inventory) 112960 141200 Goods available for sale (including beginning inventory) 169960 217200 Cost-to-retail percentage (112960/141200)=80% Less: Net sales (124460+(4500/0.90) (129460) Estimated ending inventory at current year retail prices 87740 Estimated ending inventory at cost (below) 62136 Estimated cost of goods sold 107284

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