Question

Blossom Company, which uses the retail LIFO method to determine inventory cost, has provided the following information for 2020: Cost Retail Inventory, 1/1/20 $ 280000 $418000 Net purchases 1114000 1666000 Net markups 202000 Net markdowns 88000 Net sales 1570000 Assuming stable prices (no change in the price index during 2020), what is the cost of Blossom's inventory at December 31, 2020? (Hint: Round intermediate calculation to 2 decimal places, e.g. 0.63 and final answer to 0 decimal places.) $ 399700 $ 412300. $ 395640. $ 406000.

Answer 1

Solution Cost $280,000 $1,114,000 Beginning Inventory, 1/1/2020 Add: Net Purchases Add: Net markups Less: Net markdowns Goods available for sale (excluding beginning inventory) Goods available for sale (including beginning inventory) Less: Net sales Ending inventory at current year retail prices Retail $418,000 $1,666,000 $ 202,000 ($88,000) $1,780,000 $2,198,000 ($1,570,000) $628,000 $1,114,000 $1,394,000 Estimated ending inventory at cost Estimated cost of goods sold ($412,300) $981,700 Base year cost-to-retail percentage ($280,000/$418,000) Current year cost-to-retail percentage ($1,114,000/1,780,000) 0.67 0.63 Ending Inventory at Year-end Retail Prices Inventory Layers at Base Year Retail Prices Inventory Layers Converted to Cost $628,000 $418,000 $210,000 $628,000 $280,000 $132,300 $412,300 ($418,000 x 0.67) ($ 210,000 x 0.63) Total Cost of Blossom's inventory at December 31, 2020 $412,300