Final answer:
The ending inventory for Uncle Butch's Hunting Supply Shop, calculated using the retail inventory method under the LIFO cost flow assumption, is $41,302. This was determined by finding the adjusted cost-to-retail ratio and applying it to the ending inventory at retail.
Step-by-step explanation:
To calculate the ending inventory using the retail inventory method under the LIFO cost flow assumption, we need to follow these steps:
- Calculate the cost-to-retail ratio.
- Adjust the cost-to-retail ratio for net markups and markdowns.
- Apply the adjusted cost-to-retail ratio to the ending inventory at retail to find the ending inventory at cost.
Step 1: Calculate the Initial Cost-to-Retail Ratio
Initial Cost-to-Retail Ratio = (Beginning Inventory Cost + Purchases Cost) / (Beginning Inventory Retail + Purchases Retail)
Initial Cost-to-Retail Ratio = ($35,000 + $75,000) / ($92,000 + $200,000) = $110,000 / $292,000
Initial Cost-to-Retail Ratio = 0.377 (rounded to three decimal places)
Step 2: Adjust for Net Markups and Markdowns
Retail Price After Adjustments = (Beginning Inventory Retail + Purchases Retail + Net Additional Markups - Net Markdowns)
Retail Price After Adjustments = $292,000 + $15,000 - $22,000 = $285,000
Adjusted Cost-to-Retail Ratio = $110,000 / $285,000 = 0.386 (rounded to three decimal places)
Step 3: Calculate Ending Inventory at Cost
Ending Inventory at Cost = Ending Inventory at Retail x Adjusted Cost-to-Retail Ratio
Ending Inventory at Cost = $107,000 x 0.386 = $41,302
Therefore, using the LIFO cost flow assumption, Uncle Butch's Hunting Supply Shop's ending inventory is calculated to be $41,302.