Chapter 9, Problem 9.12P

Retail inventory method; various applications

• LO9–3 through LO9–5

Raleigh Department Store uses the conventional retail method for the year ended December 31, 2016. Available information follows:

1. a. The inventory at January 1, 2016, had a retail value of $45,000 and a cost of $27,500 based on the conventional retail method.
2. b. Transactions during 2016 were as follows:

	Cost	Retail
Gross purchases	$282,000	$490,000
Purchase returns	6,500	10,000
Purchase discounts	5,000
Gross sales		492,000
Sales returns		5,000
Employee discounts		3,000
Freight-in	26,500
Net mark-ups		25,000
Net markdowns		10,000

Sales to employees are recorded net of discounts.

1. c. The retail value of the December 31, 2017, inventory was $56,100, the cost-to-retail percentage for 2017 under the LIFO retail method was 62%, and the appropriate price index was 102% of the January 1, 2017, price level.
2. d. The retail value of the December 31, 2018, inventory was $48,300, the cost-to-retail percentage for 2018 under the LIFO retail method was 61%, and the appropriate price index was 105% of the January 1, 2017, price level.

Required:

1. 1. Estimate ending inventory for 2016 using the conventional retail method.
2. 2. Estimate ending inventory for 2016 assuming Raleigh Department Store used the LIFO retail method.
3. 3. Assume Raleigh Department Store adopts the dollar-value LIFO retail method on January 1, 2017. Estimating ending inventory for 2017 and 2018.