Question

Boyne Inc. had beginning inventory of $12,060 at cost and $20,100 at retail. Net purchases were $128,030 at cost and $198,000 at retail. Net markups were $12,100; net markdowns were $7,200; and sales revenue was $151,300. Assume the price level increased from 100 at the beginning of the year to 118 at year-end. Compute ending inventory at cost using the dollar-value LIFO retail method. (Round ratios for computational purposes to 1 decimal place, e.g. 78.7% and final answer to 0 decimal places, e.g. 28,987.)

Ending inventory using the dollar-value LIFO retail method _____$

Answer 1

To compute the ending inventory at cost using the dollar-value LIFO retail method, we calculated the cost-to-retail ratio and adjusted the ending inventory for inflation, resulting in an estimated cost of $53,134.

Step-by-step explanation:

To compute ending inventory at cost using the dollar-value LIFO retail method, we first need to calculate the cost-to-retail ratio and then adjust inventory values to account for inflation.

First, add net purchases at cost to beginning inventory at cost to determine goods available for sale at cost:

$12,060 + $128,030 = $140,090

Then, calculate the ending inventory at retail before inflation adjustment:

Beginning inventory at retail + Net purchases at retail + Net markups - Net markdowns - Sales = Ending inventory at retail before inflation adjustment

$20,100 + $198,000 + $12,100 - $7,200 - $151,300 = $71,700

Now, adjust for inflation using the price index ($71,700 x 118/100 = $84,606).

To find the ending inventory at cost using the LIFO retail method, calculate the cost-to-retail ratio, which is goods available at cost divided by goods available at retail, adjusted for markups and markdowns:

Goods available at cost / (Beginning inventory at retail + Net purchases at retail + Net markups - Net markdowns) = Cost-to-retail ratio

$140,090 / ($20,100 + $198,000 + $12,100 - $7,200) = $140,090 / $223,000 = 0.6281 (62.8%)

Finally, apply the cost-to-retail ratio to the adjusted ending inventory at retail to estimate the ending inventory at cost:

$84,606 x 62.8% = $53,134

The estimated ending inventory at cost using the dollar-value LIFO retail method is $53,134 (rounded to 0 decimal places).