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:
- 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.
- 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.
- 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.
- Deduct Net Sales from Goods Available at Retail to find the Ending Inventory at Retail. So, $1,149,450 - $846,000 = $303,450.
- 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.
- 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.