Question

A company uses the retail method to estimate inventories. The following information is for the first six months of the current year: beginning inventory at cost and retail were $70,000 and $100,000 respectively, net purchases at cost and retail were $270,000 and $360,000, respectively, and sales during the first six months totaled $320,000. What is the estimated cost of goods sold at the end of the six-month period using the LIFO retail method?

Answer 1

The correct answer is $240,000.

Step-by-step explanation:

According to the scenario, given data are as follows:

Beginning inventory at cost = $70,000

Beginning inventory at retail = $100,000

Net purchases at cost = $270,000

Net purchases at retail = $360,000

Total sales = $320,000

According to the LIFO method.

Particulars Cost Retail Cost/Retail Ratio

Beginning inventory $70,000 $100,000 70%

Net purchases $270,000 $360,000 75%

Total Inventory $340,000 $460,000

Total sales $320,000

Ending inventory ( Estimated )

($360,000-$320,000)× 75% $30,000

$70,000 × 70% $70,000

Ending inventory at cost $100,000

Estimated cost of goods sold $240,000.

Hence the correct answer is $240,000.