Cost Retail (a) Martinez Department Store converted from the conventional retail
ID: 2580359 • Letter: C
Question
Cost
Retail
(a)
Martinez Department Store converted from the conventional retail method to the LIFO retail method on January 1, 2017, and is now considering converting to the dollar-value LIFO inventory method. During your examination of the financial statements for the year ended December 31, 2018, management requested that you furnish a summary showing certain computations of inventory cost for the past 3 years.Here is the available information.
1. The inventory at January 1, 2016, had a retail value of $55,100 and cost of $29,700 based on the conventional retail method. 2. Transactions during 2016 were as follows.
Cost
Retail
Purchases $288,655 $549,000 Purchase returns 5,100 10,200 Purchase discounts 5,900 Gross sales revenue (after employee discounts) 541,800 Sales returns 8,800 Employee discounts 3,000 Freight-in 17,800 Net markups 19,600 Net markdowns 12,100 3. The retail value of the December 31, 2017, inventory was $75,900, the cost ratio for 2017 under the LIFO retail method was 58%, and the regional price index was 105% of the January 1, 2017, price level. 4. The retail value of the December 31, 2018, inventory was $62,100, the cost ratio for 2018 under the LIFO retail method was 57%, and the regional price index was 109% of the January 1, 2017, price level.Explanation / Answer
COST USING RETAIL METHOD
RETAIL VALUE
METHOD
$
$
$
$
Balance b/f 1/1/2016
29700
55100
ADD PURCHASES
288655
549000
ADD FRIEGHT IN
17800
17800
LESS RETURNS
5100
10200
LESS DISCOUNTS
5900
295455
5900
550700
325155
605800
REGIONAL PRICE INDEX WRITEDOWN BY 5% @ 31 DEC
576952
LESS SALES
541800
COST OF INVENTORY
35152
COST USING RETAIL METHOD
RETAIL VALUE
METHOD
$
$
$
$
Balance b/f 1/1/2016
29700
55100
ADD PURCHASES
288655
549000
ADD FRIEGHT IN
17800
17800
LESS RETURNS
5100
10200
LESS DISCOUNTS
5900
295455
5900
550700
325155
605800
REGIONAL PRICE INDEX WRITEDOWN BY 5% @ 31 DEC
576952
LESS SALES
541800
COST OF INVENTORY
35152