1 answer

Cheyenne Company began operations on January 1, 2019, adopting the conventional retail inventory system. None of...

Question:

Cheyenne Company began operations on January 1, 2019, adopting the conventional retail inventory system. None of the Ed Acces

Cheyenne Company began operations on January 1, 2019, adopting the conventional retail inventory system. None of the Ed Access company's merchandise was marked down in 2019 and, because there was no beginning inventory, its ending inventory for 2019 of $38,500 would have been the same under either the conventional retail system or the LIFO retail system. On December 31, 2020, the store management considers adopting the LIFO retail system and desires to know how the December 31, 2020, inventory would appear under both systems. All pertinent data regarding purchases, sales, markups, and markdowns are shown below. There has been no change in the price level. Cost Retail Inventory, Jan. 1, 2020 $38,500 $60,600 Markdowns (net) 13,200 Markups (net) 22,200 Purchases (net) 132,900 174,500 Sales (net) 165,900 Determine the cost of the 2020 ending inventory under both (a) the conventional retail method and (b) the LIFO retail method. (Round ratios for computational purposes to 2 decimal place, e.g. 78.72% and final answers to 0 decimal places, e.g. 28,987.) (a) Ending inventory using conventional retail method $ (b) Ending inventory LIFO retail method A

Answers

Cheyenne Company
a- Conventional Retail Method
Cost Retail
Opening inventory 38500 60600
Add:- purchases (net) 132900 174500
171400 235100
Add:- Net markups 22200
Total 171400 257300
Deduct :- Net markupdown 13200
Sale price of goods available 244100
Deduct :- sales 165900
Ending inventory at retail 78200
Cost to retail ratio = 171400 /257300 = 66.61 %
Ending inventory at cost = 78200 * 66.61% = $ 52093
b- LIFO Retail Method
Cost Retail
Opening inventory 38500 60600
purchases (net) 132900 174500
Net markups 22200
Net markupdown -13200
Total ( excluding op. inventory ) 132900 183500
Total ( including op. inventory ) 171400 244100
Less:- sales 165900
Ending inventory at retail 78200
Cost to retail ratio = 132900 / 183500 = 72.43%
Ending inventory at cost
Ending inv. At retail prices Layers Cost to retail Ending inv. At LIFO
78200 60600 63.53% 38499.18
17600 72.43% 12747.68
51246.86
38500 / 60600 = 63.53 %
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