Required InformationProblem 9-13 (Algo) Retail inventory method; various applications [LO9-3, 9-4, 9-5)[The following information applies to the questions displayed below.]On January 1, 2021, Pet Friendly Stores adopted the retail inventory method. Inventory transactions at both cost and retail,and cost indexes for 2021 and 2022 are as follows:Beginning inventoryPurchasesPurchase returnsFreight-inNet markupsNet markdownsNet sales to customersSales to employees (net of 25% discount)Normal spoilagePrice Index:January 1, 2021December 31, 2021December 31, 2022Problem 9-13 (Algo) Part 1Estimated ending inventory at retailEstimated ending inventory at costEstimated cost of goods sold202120212022CostRetail$ 96,000 $160,000520,000 803,0002,7003,0004,0001.001.251.256,0004,000670,00012,0003,0002822Cost$600,000 $950,0002,4005,7508,000RetailRequired:1. Estimate the 2021 and 2022 ending inventory and cost of goods sold using the dollar-value LIFO retail method.8,2006,200680,00012,0004,000

Note Working 2021 2021 2022 2022 Cost Retail Price Cost Retail Price Opening Inventory A…

Answered: Required: 1. Estimate the 2021 and 2022…

FINANCIAL ACCOUNTING

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Chapter1: Financial Statements And Business Decisions

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Required Information
Problem 9-13 (Algo) Retail inventory method; various applications [LO9-3, 9-4, 9-5)
[The following information applies to the questions displayed below.]
On January 1, 2021, Pet Friendly Stores adopted the retail inventory method. Inventory transactions at both cost and retail,
and cost indexes for 2021 and 2022 are as follows:
Beginning inventory
Purchases
Purchase returns
Freight-in
Net markups
Net markdowns
Net sales to customers
Sales to employees (net of 25% discount)
Normal spoilage
Price Index:
January 1, 2021
December 31, 2021
December 31, 2022
Problem 9-13 (Algo) Part 1
Estimated ending inventory at retail
Estimated ending inventory at cost
Estimated cost of goods sold
2021
2021
2022
Cost
Retail
$ 96,000 $160,000
520,000 803,000
2,700
3,000
4,000
1.00
1.25
1.25
6,000
4,000
670,000
12,000
3,000
2822
Cost
$600,000 $950,000
2,400
5,750
8,000
Retail
Required:
1. Estimate the 2021 and 2022 ending inventory and cost of goods sold using the dollar-value LIFO retail method.
8,200
6,200
680,000
12,000
4,000

Expert Solution

Step 1

	Note	Working	2021	2021	2022	2022
			Cost	Retail Price	Cost	Retail Price
Opening Inventory	A		96,000	160,000	143,450	273,000
Cost to retail ratio		Cost/Retail *100		60.00%		52.54%
Purchases	B		520,000	803,000	600,000	950,000
Purchase Return	C		(2,700)	(3,000)	(2,400)	(5,750)
Freight in	D		4,000		8,000
Markups	E			6,000		8,200
Markdowns	F			(4,000)		(6,200)
Total Purchases	G	SUM(B:F)	521,300	802,000	605,600	946,250
Cost to retail ratio		Cost/Retail *100		65.00%		64.00%
Normal Spoilage	H			(3,000)		(4,000)
Cost of Goods sold	L	A+G+H	617,300	959,000	749,050	1,215,250
Sales
Sales to customers	I	Given		670,000		680,000
Sales to employees	J	12,000/0.75		16,000		16,000
Total Sales	K	I+J		686,000		696,000

Closing Inventory		L-K		273,000		519,250

Working Note for Closing Inventory

1 ) For ending on December 31, 2021

Ending inventory as on December 31, 2021 = $ 273,000

Ending inventory adjusted for price changes @ 1.25 = 273,000/1.25 = $ 218,400

Date	Inventory $	Price Index	Cost to retail	Inventory Cost $
1/1/2021	160,000	1	60%	96,000
12/31/2021	58,400	1.25	65%	47,450
	218,400			143,450

1 ) For ending on December 31, 2022

Ending inventory as on December 31, 2022 = $ 519,250

Ending inventory adjusted for price changes @ 1.25 = 519,250/1.25 = $ 415,400

Date	Inventory $	Price Index	Cost to retail	Inventory Cost $
12/31/2021	273,000	1.25	52.54%	184,275
12/31/2022	142,400	1.25	64.00%	113,920
	415,400			298195

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