Question

Raleigh Department Store uses the conventional retail method for the year ended December 31, 2019. Available information follows: a. The inventory at January 1, 2019, had a retail value of $40,000 and a cost of $31,650 based on the conventional retail method. b. Transactions during 2019 were as follows: Cost $212,100 6,000 4,500 Retail $440,000 25,000 Gross purchases Purchase returns Purchase discounts Gross sales Sales returns Employee discounts Freight-in Net markups Net markdowns 361,500 10,000 6,000 28,000 20,000 25,000 Sales to employees are recorded net of discounts. c. The retail value of the December 31, 2020, inventory was $101,325, the cost-to-retail percentage for 2020 under the LIFO retail method was 67%, and the appropriate price index was 105% of the January 1, 2020, price level. d. The retail value of the December 31, 2021, inventory was $46,980, the cost-to-retail percentage for 2021 under the LIFO retail method was 66%, and the appropriate price index was 108% of the January 1, 2020, price level.

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Answer 1

Solution:

Particulars	Cost	Retail	Cots to retail ratio
Beginning inventory	31,650	40,000
Add: Purchases	212,100	440,000
Add:Freight in	28,000
Less:Purchase return	(6,000)	(25,000)
Less:Purchase discount	(4,500)
Add:Net markups		20,000
Less:Net markdowns		(25,000)
Goods available for sales	261,250	450,000
Cost to retail percentage			58%(261,250/(450,000+25,000))
Less:Net sales
Sales		361,500
Sales return		(10,000)
Employee discounts		(6,000)
Estimates ending inventory at retail		345,500
estimates ending inventory at cost	200,390
345,500*58%