Explanation Dollar-Value-LIFO: This method shows all the inventory figures at dollar price rather than units. Under this inventory method, the units that are purchased last are sold first. Thus, it starts from the selling of the units recently purchased and ending with the beginning inventory. To estimate LIFO from retail prices, the dollar-value LIFO retail method combines the dollar-value LIFO method and LIFO retail method when the price level has changed. Calculate the cost of ending inventory using the dollar-value LIFO retail inventory method. Step 1: Calculate the amount of estimated ending inventory at retail. Details Cost ($) Retail ($) Beginning inventory 75,000 120,000 Add: Net purchase 110,000 165,000 Net additional markups 8,000 Less: Net additional markdowns 0 (6,000) Goods available for sale – Excluding beginning inventory 110,000 167,000 Goods available for sale – Including beginning inventory 185,000 287,000 Less: Net sales (147,000) Estimated ending inventory at current year retail prices $140,000 Table (1) Step 2: Calculate increase in retail inventory at base-year prices. (i) Calculate retail price converted to base-year prices. Retail price converted to base-year prices } = [ Ending inventory at retail × ( Price index on 1/1/16 Price index on 31/12/16 ) ] = [ $140,000 × ( 100 110 ) ] = $ 127 , 273 (ii) Calculate increase in retail inventory at base-year prices. Increase in retail inventory at base-year prices } = ( Retail price converted to base-year price − Beginning inventory at retail ) = ( $ 127 , 273 − $ 120 , 000 ) = $ 7 , 273 Step 3: Calculate ending inventory at retail Ending inventory at retail consists of price index on January 1, 2016 and December 31, 2016: (i) Calculate ending inventory at retail consist of price index on January 1, 2016. Ending inventory at retail consists of price index on January 1, 2016 } = [ Beginning inventory at retail × ( Price index on 1/1/16 Price index on 1/1/16 ) ] = [ $ 120 , 000 × ( 100 100 ) ] = $ 120 , 000 (ii) Calculate ending inventory at retail consist of price index on December 31, 2016

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Calculate the cost of ending inventory using the dollar-value LIFO retail inventory method.

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