Question

Brief Exercise 9-8 Retail inventory method; LIFO [LO9-3] 0.71 points Kiddie World uses a periodic inventory system and the retail inventory method to estimate ending inventory and cost of goods sold. The following data are available for the quarter ending September 30, 2018: Beginning inventory Net purchases Freight-in Net markups Net markdowns Net sales Cost Retail $360,000 $ 510,000 884,000 1,270,000 41,100 54,000 24,000 1,230,000 Estimate ending inventory and cost of goods sold (LIFO). (Round ratio calculation to 2 decimal places (i.e., 0.1234 should be entered as 12.34%.)) Answer is complete but not entirely correct. Cost Retail Cost-to- Retail Ratio $ 360,000 884,000 41,100 510,000 1,270,000 Beginning inventory Plus: Net purchases Freight-in Net markups Less: Net markdowns Goods available for sale (excluding beg. Inventory) Goods available for sale (including beg. Inventory) 54,000 (24,000) 1,300,000 925,100 1,285,100 1,810,000 Cost-to-retail percentage 71.16% 0 (1,230,000) $ 580,000 Less: Net sales Estimated ending inventory at retail Estimated ending inventory at cost Estimated cost of goods sold 412,728 > 872,372 $

Answer 1

Please give positive ratings so I can keep answering. It would help me a lot. Please comment if you have any query. Thanks!

Kiddie World
As LIFO method to be used so 2 types of cost to retail percentage is to be computed.
1st will be beginning inventory i.e. 360,000/ 510,000= 70.59%.
2nd will be Goods available for sale excluding beginning inventory i.e. 925,100/ 1,300,000= 71.16%.
Now ending inventory under retail method is $ 580,000. As LIFO method is used beginning inventory will be as it is in the stock and not sold. So $ 580,000 will be broken into beginning inventory and Goods available for sale excluding beginning inventory.
Breakup of ending inventory	Retail	Retail to Cost %	Cost
Beginning inventory	510,000.00	70.59%	360,009.00
Goods available for sale excluding beginning inventory	70,000.00	71.16%	49,812.00	$ 580,000 less $ 510,000 will give $ 70,000.
Ending inventory under cost method			409,821.00
Estimated cost of goods sold:
Goods available for sale including beginning inventory	1,285,100.00
Less: Ending inventory under cost method	409,821.00
Estimated cost of goods sold:	875,279.00