Raleigh Department Store converted from the conventional retail method to the LIFO retail method on January 1, 2014, and is now considering converting to the dollar-value LIFO retail inventory method. Management requested, during your examination of the financial statements for the year ended December 31, 2016, that you furnish a summary showing certain computations of inventory costs for the past three years. Available information follows: (a) The inventory at January 1, 2014, had a retail value of $39,000 and a cost of $31,130 based on conventional retail method. (b) Transactions during 2014 were as follows: Cost Retail Gross purchases 200,150 430,000 Purchase returns 5,900 26,000 Purchase discounts 4,400 Gross sales 397,500 Sales returns 8,000 Employee discounts 2,500 Freight-in 28,500 Net Markups 19,000 Net markdowns 26,000 Sales to employees are recorded net of discounts. (c) The retail value of the December 31, 2015, inventory was $49,290, the cost-to-retail percentage for 2015 under the LIFO retail method was 78%, and the appropriate price index was 106% of the January 1, 2015, price level. (d). The retail value of the December 31, 2016, inventory was $46,870, the cost-to-retail percentage for 2016 under the LIFO retail method was 77% and the appropriate price index was 109% of the January 1, 2015, price level. Calculate the cost of inventory for December 31, 2015 and 2016, based on the dollar-value LIFO retail method.
Raleigh Department Store converted from the conventional retail method to the LIFO retail method on January 1, 2014, and is now considering converting to the dollar-value LIFO retail inventory method. Management requested, during your examination of the financial statements for the year ended December 31, 2016, that you furnish a summary showing certain computations of inventory costs for the past three years. Available information follows: (a) The inventory at January 1, 2014, had a retail value of $39,000 and a cost of $31,130 based on conventional retail method. (b) Transactions during 2014 were as follows: Cost Retail Gross purchases 200,150 430,000 Purchase returns 5,900 26,000 Purchase discounts 4,400 Gross sales 397,500 Sales returns 8,000 Employee discounts 2,500 Freight-in 28,500 Net Markups 19,000 Net markdowns 26,000 Sales to employees are recorded net of discounts. (c) The retail value of the December 31, 2015, inventory was $49,290, the cost-to-retail percentage for 2015 under the LIFO retail method was 78%, and the appropriate price index was 106% of the January 1, 2015, price level. (d). The retail value of the December 31, 2016, inventory was $46,870, the cost-to-retail percentage for 2016 under the LIFO retail method was 77% and the appropriate price index was 109% of the January 1, 2015, price level. Calculate the cost of inventory for December 31, 2015 and 2016, based on the dollar-value LIFO retail method.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Raleigh Department Store converted from the conventional retail method to the LIFO retail method
on January 1, 2014, and is now considering converting to the dollar-value LIFO retail inventory
method. Management requested, during your examination of the financial statements for the year
ended December 31, 2016, that you furnish a summary showing certain computations of inventory
costs for the past three years. Available information follows:
(a) The inventory at January 1, 2014, had a retail value of $39,000 and a cost of $31,130 based on
conventional retail method.
(b) Transactions during 2014 were as follows:
Cost
Retail
Gross purchases
200,150 430,000
Purchase returns
5,900
26,000
Purchase discounts 4,400
Gross sales
397,500
Sales returns
8,000
Employee discounts
2,500
Freight-in
28,500
Net Markups
19,000
Net markdowns
26,000
Sales to employees are recorded net of discounts.
(c) The retail value of the December 31, 2015, inventory was $49,290, the cost-to-retail percentage
for 2015 under the LIFO retail method was 78%, and the appropriate price index was 106% of the
January 1, 2015, price level.
(d). The retail value of the December 31, 2016, inventory was $46,870, the cost-to-retail percentage
for 2016 under the LIFO retail method was 77% and the appropriate price index was 109% of the
January 1, 2015, price level.
Calculate the cost of inventory for December 31, 2015 and 2016, based on the dollar-value LIFO
retail method.
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