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On January 1, 2021, the Coldstone Corporation adopted the dollar-value LIFO retail inventory method. Beginning inventory at cost and at retail were $200,000 and $282,450, respectively. Net purchases during the year at cost and at retail were $693,600 and $856,000, respectively. Markups during the year were $11,000. There were no markdowns. Net sales for 2021 were $846,000. The retail price index at the end of 2021 was 1.05. What is the inventory balance that Coldstone would report in its 12/31/2021 balance sheet

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Final answer:

Coldstone Corporation's inventory balance for the 12/31/2021 balance sheet, using the dollar-value LIFO retail inventory method, and adjusting for the retail price index, is $204,757.50.

Step-by-step explanation:

To calculate the inventory balance for Coldstone Corporation, we apply the dollar-value LIFO retail inventory method. We need to convert the Ending Inventory at retail to cost by using the retail price index. The steps involved are as follows:

  1. Calculate the cost-to-equal ratio at the beginning of the year by dividing Beginning Inventory at Cost ($200,000) by Beginning Inventory at Retail ($282,450). This gives us a ratio of 0.7085.
  2. Next, we add Net Purchases at Cost to Beginning Inventory at Cost to get the Cost of Goods Available for Sale. This is $200,000 + $693,600 = $893,600.
  3. Net Purchases at Retail are added to Beginning Inventory at Retail and Markups to get Goods Available for Sale at Retail. This is $282,450 + $856,000 + $11,000 = $1,149,450.
  4. Deduct Net Sales from Goods Available at Retail to find the Ending Inventory at Retail. So, $1,149,450 - $846,000 = $303,450.
  5. Finally, we adjust the Ending Inventory at Retail to reflect year-end prices by applying the retail price index (1.05). So, $303,450 / 1.05 = $289,000.
  6. Lastly, multiply the adjusted Ending Inventory at Retail by the Cost-to-Retail Ratio to get the Ending Inventory at Cost, which is $289,000 × 0.7085 = $204,757.50.

Therefore, the inventory balance that Coldstone would report in its 12/31/2021 balance sheet is $204,757.50.

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