Question

On January 1, 2024, the Coldstone Corporation adopted the dollar-value LIFO retail inventory method. Beginning inventory at cost and at retail were $160,000 and $258,300, respectively. Net purchases during the year at cost and at retail were $657,600 and $814,000, respectively. Markups during the year were $8,000. There were no markdowns. Net sales for 2024 were $761,100. The retail price index at the end of 2024 was 1.05. What is the inventory balance that Coldstone would report in its 12/31/2024 balance sheet? Note: Do not round intermediate calculations. Multiple Choice $243,200 $319,200 $198,388 $255,360

Answer 1

To calculate the inventory balance using the dollar-value LIFO retail inventory method, you need to follow several steps, including calculating the ending inventory at retail, the cost-to-retail ratio, and the ending inventory at cost. Using the given information and calculations, the inventory balance that Coldstone would report is $198,388.

Step-by-step explanation:

To calculate the inventory balance using the dollar-value LIFO retail inventory method, we need to follow these steps:

Calculate the ending inventory at retail by adding the beginning inventory at retail, net purchases at retail, and markups.

1. Calculate the cost-to-retail ratio by dividing the beginning inventory at cost by the beginning inventory at retail.
2. Calculate the ending inventory at cost by multiplying the ending inventory at retail by the cost-to-retail ratio.

Using the given information:

• Beginning inventory at cost: $160,000
• Beginning inventory at retail: $258,300
• Net purchases at cost: $657,600
• Net purchases at retail: $814,000
• Markups: $8,000
• Retail price index: 1.05

By following the steps, we can determine that the inventory balance that Coldstone would report in its 12/31/2024 balance sheet is $198,388.

Answer 2

To calculate the inventory balance using the dollar-value LIFO retail inventory method, determine the cost-to-retail ratio, subtract net sales from the total retail to get ending inventory at retail, then adjust by the retail price index and convert to cost to find the ending inventory cost which is $198,388.

Step-by-step explanation:

The question relates to calculating the inventory balance using the dollar-value LIFO retail inventory method. To find the inventory balance, we need to follow a series of steps:

• Calculate the ending inventory at retail.
• Adjust the ending inventory at retail by the price index.
• Convert the adjusted ending inventory to a cost basis.

Here’s the calculation:

1. Calculate the cost-to-retail ratio using beginning inventory and net purchases. (Beginning Inventory at Cost + Net Purchases at Cost) / (Beginning Inventory at Retail + Net Purchases at Retail + Markups).
2. Calculate ending inventory at retail by subtracting net sales from the sum of beginning inventory at retail, net purchases at retail, and markups.
3. Adjust the ending inventory at retail by the retail price index to estimate the ending inventory at current year prices.
4. Convert the adjusted ending inventory at retail back to cost by multiplying it by the cost-to-retail ratio.

Following these steps, the inventory balance that Coldstone would report on its 12/31/2024 balance sheet is $198,388.