Huddell Company, which is both a wholesaler and retailer, purchases merchandise from various suppliers. Thedollar-value LIFO method is used for the wholesale inventories.Huddell determines the estimated cost of its retail ending inventories using the conventional retail inventorymethod, which approximates lower of average cost or market.Required:1. a. What are the advantages of using the dollar-value LIFO method as opposed to the traditional LIFOmethod?b. How does the application of the dollar-value LIFO method differ from the application of the traditionalLIFO method?2. a. In the calculation of the cost-to-retail percentage used to determine the estimated cost of its ending inventories, how should Huddell use∙ Net markups?∙ Net markdowns?b. Why does Huddell’s retail inventory method approximate lower of average cost or market?
Huddell Company, which is both a wholesaler and retailer, purchases merchandise from various suppliers. The
dollar-value LIFO method is used for the wholesale inventories.
Huddell determines the estimated cost of its retail ending inventories using the conventional retail inventory
method, which approximates lower of average cost or market.
Required:
1. a. What are the advantages of using the dollar-value LIFO method as opposed to the traditional LIFO
method?
b. How does the application of the dollar-value LIFO method differ from the application of the traditional
LIFO method?
2. a. In the calculation of the cost-to-retail percentage used to determine the estimated cost of its ending inventories, how should Huddell use
∙ Net markups?
∙ Net markdowns?
b. Why does Huddell’s retail inventory method approximate lower of average cost or market?
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