Raleigh Department Store uses the conventional retail method for the year ended December 31, 2016. Available information follows: The inventory at January 1, 2016, had a retail value of $36,000 and a cost of $29,570 based on the conventional retail method. Transactions during 2016 were as follows: Cost Retail Gross purchases $ 165,860 $ 400,000 Purchase returns 5,600 29,000 Purchase discounts 4,100 Gross sales 323,000 Sales returns 10,000 Employee discounts 3,500 Freight-in 30,000 Net markups 16,000 Net markdowns 29,000 Sales to employees are recorded net of discounts. The retail value of the December 31, 2017, inventory was $87,450, the cost-to-retail percentage for 2017 under the LIFO retail method was 67%, and the appropriate price index was 106% of the January 1, 2017, price level. The retail value of the December 31, 2018, inventory was $41,965, the cost-to-retail percentage for 2018 under the LIFO retail method was 66%, and the appropriate price index was 109% of the January 1, 2017, price level. Required:1. Estimate ending inventory for 2016 using the conventional retail method.2. Estimate ending inventory for 2016 assuming Raleigh Department Store used the LIFO retail method.3. Assume Raleigh Department Store adopts the dollar-value LIFO retail method on January 1, 2017. Estimating ending inventory for 2017 and 2018. Estimate ending inventory for 2016 assuming Raleigh Department Store used the LIFO retail method. Cost Retail Cost-to-Retail Ratio Beginning inventory $29,570 $36,000 Add: Purchases 165,860 400,000 Add: Freight-in 30,000 0 Less: Purchase returns (5,600) (29,000) Less: Purchase discounts (4,100) 0 Add: Net markups 0 16,000 Less: Net markdowns 0 (29,000) Goods available for sale (excluding beginning inventory) 186,160 358,000 Goods available for sale (including beginning inventory) 215,730 394,000 Cost-to-retail percentage 52% Less: Net sales (313,000) Less: Employee discounts (3,500) Estimated ending inventory at retail $77,500 Estimated ending inventory at cost $51,150

Raleigh Department Store uses the conventional retail method for the year ended December 31, 2016. Available information follows: The inventory at January 1, 2016, had a retail value of $36,000 and a cost of $29,570 based on the conventional retail method. Transactions during 2016 were as follows: Cost Retail Gross purchases $ 165,860 $ 400,000 Purchase returns 5,600 29,000 Purchase discounts 4,100 Gross sales 323,000 Sales returns 10,000 Employee discounts 3,500 Freight-in 30,000 Net markups 16,000 Net markdowns 29,000 Sales to employees are recorded net of discounts. The retail value of the December 31, 2017, inventory was $87,450, the cost-to-retail percentage for 2017 under the LIFO retail method was 67%, and the appropriate price index was 106% of the January 1, 2017, price level. The retail value of the December 31, 2018, inventory was $41,965, the cost-to-retail percentage for 2018 under the LIFO retail method was 66%, and the appropriate price index was 109% of the January 1, 2017, price level. Required:1. Estimate ending inventory for 2016 using the conventional retail method.2. Estimate ending inventory for 2016 assuming Raleigh Department Store used the LIFO retail method.3. Assume Raleigh Department Store adopts the dollar-value LIFO retail method on January 1, 2017. Estimating ending inventory for 2017 and 2018. Estimate ending inventory for 2016 assuming Raleigh Department Store used the LIFO retail method. Cost Retail Cost-to-Retail Ratio Beginning inventory $29,570 $36,000 Add: Purchases 165,860 400,000 Add: Freight-in 30,000 0 Less: Purchase returns (5,600) (29,000) Less: Purchase discounts (4,100) 0 Add: Net markups 0 16,000 Less: Net markdowns 0 (29,000) Goods available for sale (excluding beginning inventory) 186,160 358,000 Goods available for sale (including beginning inventory) 215,730 394,000 Cost-to-retail percentage 52% Less: Net sales (313,000) Less: Employee discounts (3,500) Estimated ending inventory at retail $77,500 Estimated ending inventory at cost $51,150

Financial Accounting

15th Edition

ISBN:9781337272124

Author:Carl Warren, James M. Reeve, Jonathan Duchac

Publisher:Carl Warren, James M. Reeve, Jonathan Duchac

Chapter7: Inventories

Section: Chapter Questions

Problem 7PB: Selected data on merchandise inventory, purchases, and sales for Jaffe Co. and Coronado Co. are as...

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

The inventory at January 1, 2016, had a retail value of $36,000 and a cost of $29,570 based on the conventional retail method.
Transactions during 2016 were as follows:

	Cost	Retail
Gross purchases	$	165,860	$	400,000
Purchase returns		5,600		29,000
Purchase discounts		4,100
Gross sales				323,000
Sales returns				10,000
Employee discounts				3,500
Freight-in		30,000
Net markups				16,000
Net markdowns				29,000

Sales to employees are recorded net of discounts.

The retail value of the December 31, 2017, inventory was $87,450, the cost-to-retail percentage for 2017 under the LIFO retail method was 67%, and the appropriate price index was 106% of the January 1, 2017, price level.
The retail value of the December 31, 2018, inventory was $41,965, the cost-to-retail percentage for 2018 under the LIFO retail method was 66%, and the appropriate price index was 109% of the January 1, 2017, price level.

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

Estimate ending inventory for 2016 assuming Raleigh Department Store used the LIFO retail method.

	Cost	Retail	Cost-to-Retail Ratio
Beginning inventory	$29,570	$36,000
Add: Purchases	165,860	400,000
Add: Freight-in	30,000	0
Less: Purchase returns	(5,600)	(29,000)
Less: Purchase discounts	(4,100)	0
Add: Net markups	0	16,000
Less: Net markdowns	0	(29,000)
Goods available for sale (excluding beginning inventory)	186,160	358,000
Goods available for sale (including beginning inventory)	215,730	394,000

Cost-to-retail percentage			52%

Less: Net sales		(313,000)
Less: Employee discounts		(3,500)
Estimated ending inventory at retail		$77,500
Estimated ending inventory at cost	$51,150

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