On January 1, 2018, HGC Camera Store adopted the dollar-value LIFO retail invent

Question

On January 1, 2018, HGC Camera Store adopted the dollar-value LIFO retail inventory method. Inventory transactions at both cost and retail, and cost indexes for 2018 and 2019 are as follows:

Required:
Estimate the 2018 and 2019 ending inventory and cost of goods sold using the dollar-value LIFO retail inventory method. (Do not round other intermediate calculations. Round your cost-to-retail percentage calculations to 2 decimal places and final answers to the nearest whole dollar.)

2018 2019 Cost Retail Cost Retail Beginning inventory $ 58,500 $ 78,000 Net purchases 110,180 127,000 $ 115,808 $ 133,100 Freight-in 3,900 4,400 Net markups 19,500 11,800 Net markdowns 3,900 4,100 Net sales to customers 125,380 119,140 Sales to employees (net of 20% discount) 3,600 6,000 Price Index: January 1, 2018 1.00 December 31, 2018 1.08 December 31, 2019 1.14

Explanation / Answer

2018 2019 Estimated ending inventory at retail $90,720 $110,880 Estimated ending inventory at cost $68,676 $85,887.6 Estimated cost of goods sold $103,904 $102,996.4 Year 2018 Cost Retail Beginning inventory $58,500 $78,000 Add:Net purchases $110,180 $127,000 Add:Freight-in $3,900 Add:Net markups $19,500 less: Net markdowns -$3,900 Goods available for sale (excluding beginning inventory) $114,080 $142,600 Goods available for sale (including beginning inventory) $172,580 $220,600 Less: Net sales -$128,980 Less:Employee discounts (3600/(1-20%) - 3600 = -$900 Estimated ending inventory at retail $90,720 Estimated ending inventory at cost (calculated below) $68,676 Estimated cost of goods sold ($172,580 - 68,676) $103,904 The cost-to-retail ratio under LIFO for 2016 can be computed as follows: Base layer cost to retail % = $58,500/$78000 75.00% 2018 layer cost to retail % = Net purchases at cost + freightin/Net purchases plus markups less markdowns at retail 2018 layer cost to retail % = $114080/$142,600 80.00% Beginning inventory (Retail) $78,000 75.00% $58,500 Increment in 2016 (90720-782000) $12,720 80.00% $10,176 Ending inventory $90,720 $68,676 Year 2019 Cost Retail Beginning inventory $68,676 $90,720 Add:Net purchases $115,808 $133,100 Add:Freight-in $4,400 Add:Net markups $11,800 less: Net markdowns -$4,100 Goods available for sale (excluding beginning inventory) $120,208 $140,800 Goods available for sale (including beginning inventory) $188,884 $231,520 Less: Net sales -$119,140 Less:Employee discounts (6000/(1-20%) - 6000= -$1,500 Estimated ending inventory at retail $110,880 Estimated ending inventory at cost (calculated below) $85,887.6 Estimated cost of goods sold $102,996.4 The cost-to-retail ratio under LIFO for 2016 can be computed as follows: Base layer cost to retail % = $58,500/$78000 75.00% 2019 layer cost to retail % = Net purchases at cost + freightin/Net purchases plus markups less markdowns at retail 2018 layer cost to retail % = $103,800/$124,000 80.00% 2019 layer cost to retail % = $120,208/$140800 85.38% Beginning inventory (Retail) $78,000 75.00% $58,500 Increment in 2018(above) $12,720 80.00% $10,176 Increment in 2019 (diference) $20,160 85.38% $17,211.6 Ending inventory $110,880 $85,887.6

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