Concept explainers
Calculate the cost of ending inventory for 2015, 2016, 2017, and 2018 years by using dollar-value LIFO retail method.
Explanation of Solution
Dollar-Value-LIFO: This method shows all the inventory figures at dollar price rather than units. Under this inventory method, the units that are purchased last are sold first. Thus, it starts from the selling of the units recently purchased and ending with the beginning inventory.
Calculate the cost of ending inventory for 2015, 2016, 2017, and 2018 years by using dollar-value LIFO retail method:
For the year 2015:
Step 1: Calculate the amount of estimated ending inventory at retail.
I Incorporation | ||
Ending Inventory Under DVL Retail Method | ||
For the Year 2015 | ||
Details | Cost ($) | Retail ($) |
Beginning inventory | 40,000 | 80,000 |
Add: Net purchase | 85,500 | 190,000 |
Goods available for sale – Excluding beginning inventory | 85,500 | 190,000 |
Goods available for sale – Including beginning inventory | 125,500 | 270,000 |
Less: Net sales | (200,000) | |
Estimated ending inventory at retail for 2015 | $70,000 |
Table (1)
Step 2: Calculate ending inventory at retail at base-year prices.
Step 3: Calculate inventory change at retail at base year prices.
Step 4: Calculate the change at retail at relevant current costs.
Step 5: Calculate the change at relevant current costs.
Step 6: Calculate ending inventory at cost.
Hence, the ending inventory at cost for 2018 is $33,333.
Working note 1:
Calculate cost-to-retail ratio.
Working note 2:
Calculate cost-to-retail ratio.
For the year 2016:
Step 1: Calculate the amount of estimated ending inventory at retail.
I Incorporation | ||
Ending Inventory Under DVL Retail Method | ||
For the Year 2016 | ||
Details | Cost ($) | Retail ($) |
Beginning inventory | 33,333 | 70,000 |
Add: Net purchase | 92,000 | 230,000 |
Goods available for sale – Excluding beginning inventory | 92,000 | 230,000 |
Goods available for sale – Including beginning inventory | 125,333 | 300,000 |
Less: Net sales | (210,000) | |
Estimated ending inventory at retail for 2016 | $90,000 |
Table (1)
Step 2: Calculate ending inventory at retail at base-year prices.
Step 3: Calculate inventory change at retail at base year prices.
Step 4: Calculate the change at retail at relevant current costs.
Step 5: Calculate the change at relevant current costs.
Step 6: Calculate ending inventory at cost.
Hence, the ending inventory at cost for 2016 is $39,999.
Working note 1:
Calculate cost-to-retail ratio.
For the year 2017:
Step 1: Calculate the amount of estimated ending inventory at retail.
I Incorporation | ||
Ending Inventory Under DVL Retail Method | ||
For the Year 2017 | ||
Details | Cost ($) | Retail ($) |
Beginning inventory | 39,999 | 90,000 |
Add: Net purchase | 117,600 | 280,000 |
Goods available for sale – Excluding beginning inventory | 117,600 | 280,000 |
Goods available for sale – Including beginning inventory | 157,599 | 370,000 |
Less: Net sales | (260,000) | |
Estimated ending inventory at retail for 2017 | $110,000 |
Table (3)
Step 2: Calculate ending inventory at retail at base-year prices.
Step 3: Calculate inventory change at retail at base year prices.
Step 4: Calculate the change at retail at relevant current costs.
Step 5: Calculate the change at relevant current costs.
Step 6: Calculate ending inventory at cost.
Hence, the ending inventory at cost for 2017 is$44,963.
Working note 1:
Calculate cost-to-retail ratio.
For the year 2018:
Step 1: Calculate the amount of estimated ending inventory at retail.
I Incorporation | ||
Ending Inventory Under DVL Retail Method | ||
For the Year 2018 | ||
Details | Cost ($) | Retail ($) |
Beginning inventory | 44,963 | 110,000 |
Add: Net purchase | 147,200 | 320,000 |
Goods available for sale – Excluding beginning inventory | 147,200 | 320,000 |
Goods available for sale – Including beginning inventory | 192,163 | 430,000 |
Less: Net sales | (300,000) | |
Estimated ending inventory at retail for 2018 | $130,000 |
Table (4)
Step 2: Calculate ending inventory at retail at base-year prices.
Step 3: Calculate inventory change at retail at base year prices.
Step 4: Calculate the change at retail at relevant current costs.
Step 5: Calculate the change at relevant current costs.
Step 6: Calculate ending inventory at cost.
Hence, the ending inventory at cost for 2018 is$52,054.
Working note 1:
Calculate cost-to-retail ratio.
Want to see more full solutions like this?
Chapter 8 Solutions
Cengagenowv2, 1 Term Printed Access Card For Wahlen/jones/pagach’s Intermediate Accounting: Reporting And Analysis, 2017 Update, 2nd
- Financial statement data for years ending December 31 for Tango Company follow: a. Determine the inventory turnover for 20Y7 and 20Y6. b. Determine the days sales in inventory for 20Y7 and 20Y6. Use 365 days and round to one decimal place. c. Does the change in inventory turnover and the days sales in inventory from 20Y6 to 20Y7 indicate a favorable or an unfavorable trend?arrow_forwardHabicht Company was formed in 2018 to produce a single product. The production and sales for the next 4 years were as follows: Required: 1. Determine the gross profit for each year under each of the following periodic inventory methods: a. FIFO b. LIFO c. Average cost (Round unit costs to 3 decimal places.) 2. Next Level Explain whether the companys return on assets (net income divided by average total assets) would be higher under FIFO or LIFO.arrow_forwardFinancial statement data for years ending December 31 for Holland Company follow: a. Determine the inventory turnover for 20Y4 and 20Y3. b. Determine the days sales in inventory for 20Y4 and 20Y3. Use 365 days and round to one decimal place. c. Does the change in inventory turnover and the days sales in inventory from 20Y3 to 20Y4 indicate a favorable or an unfavorable trend?arrow_forward
- Beginning inventory, purchases, and sales for 30xT are as follows: Assuming a perpetual inventory system and using the weighted average method, determine (a) the weighted average unit cost after the May 23 purchase, (b) the cost of the merchandise sold on May 26, and (c) the inventory on May 31.arrow_forwardInventory Analysis Singleton Inc. reported the following information for the current year: Required: Compute Singletons (a) gross profit ratio, (b) inventory turnover ratio, and (c) average days to sell inventory. (Note: Round all answers to two decimal places.)arrow_forwardDollar-Value LIFO Kwestel Company adopted the dollar-value LIFO method for inventory valuation at the beginning of 2015. The following information about the inventory at the end of each year is available from Kwestels records: Required: Calculate the dollar-value LIFO inventory at the end of each year. Round to the nearest dollar.arrow_forward
- Assume the following data for Burnette Merchandising for 2023: View the data. On December 31, a physical count reveals 15 units in ending inventory. Assume a perpetual inventory system and all sales occurred prior to October 30th. Under the FIFO method, cost of goods sold on the income statement would be: OA. $375. OB. $537. OC. $162. D. $420. Data Beginning inventory March 18 purchase June 10 purchase October 30 purchase Print 10 units at $7 each 15 units at $9 each 20 units at $10 each 12 units at $11 each Done - Xarrow_forwardUse the following information to complete the calculations below. Cost of goods sold $195,640 Inventory: Beginning of year 20,500 End of year 18,628 a. Compute inventory turnover. b. Compute average daily cost of goods sold using a 365 day year. c. Compute number of days' sales in inventory. Round your answer to one decimal place. daysarrow_forwardWhat should Cake report as cost of goods sold for 2022? * Cake Company sells one product which it purchases from various suppliers. The trial balance on December 31, 2022 included the following accounts: Sales (100,000 units at P150) Sales discount Purchase Purchase discount The inventory purchases during 2022 were as follows: Beginning inventory, January 1 Purchases, quarter ended March 31 Purchases, quarter ended June 30 Purchases, quarter ended Sept. 30 Purchases, quarter ended Dec. 31 Units 20,000 30,000 40,000 50,000 10,000 150,000 Unit cost 60 65 70 75 15,000,000 1,000,000 9,300,000 400,000 80 Total cost 1,200,000 1,950,000 2,800,000 3,750,000 800,000 10,500,000 Cake's accounting policy is to report inventory in its financial statements at the lower of cost or net realizable value. Cost is determined under the first-out method. Cake has determined that, on December 31, 2022, the replacement cost of its inventory was P70 per unit and the net realizable value was P72 per unit. The…arrow_forward
- Exercise 9-15 (Algo) Retail inventory method; LIFO (LO9-3] Crosby Company owns a chain of hardware stores throughout the state. The company 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 three months ending March 31, 2021: Cost Retail Beginning inventory Net purchases Net markups $220,000 697,000 $361,000 830,000 27,000 7,000 825,000 Net markdowns Net sales Required: Complete the table below to estimate the LIFO cost of ending inventory and cost of goods sold for the threefmonths ending March 31, 2021, using the information provided. Assume stable retail prices during the period. (Round ratio calculation to 2 decimal places (i.e., 0.1234 should be entered as 12.34%.). Enter amounts to be deducted with a minus sign.) X Answer is not complete. Cost-to- Retail Ratio Cost Retail Beginning inventory 220,000 2$ 361,000 Net purchases 697,000 O 830,000 Net markups 27,000 Net…arrow_forwardCompute Altoona Company's (a) inventory turnover ratio and (b) number of days' sales in inventory ratio, using the following information. Use 365 days year. Round your intermediate calculations to 2 decimal places and final answers to 1 decimal place. Cost of Goods Sold $727,000 Beginning Inventory 60,000 Ending Inventory 73,000 (a) Inventory Turnover Ratio (b) Number of Days' Sales in Inventory Ratioarrow_forwardNext Hope reported the following income statement for the year ended December 31, 2026: View the income statement. Requirements 1. 2. Compute Next Hope's inventory turnover rate for the year. (Round to two decimal places.) Compute Next Hope's days' sales in inventory for the year. (Round to two decimal places.) ... Requirement 1. Compute Next Hope's inventory turnover rate for the year. (Round to two decimal places.) Select the labels and enter the amounts to compute the inventory turnover rate. (Round your answer to two decimal places, X.XX.) Income statement = Inventory turnover = times Next Hope Income Statement Year Ended December 31, 2026 Requirement 2. Compute Next Hope's days' sales in inventory for the year. (Round to two decimal places.) ÷ ÷ Select the labels and enter the amounts to compute the days' sales in inventory for the year. (Enter all amounts to two decimal places, X.XX.) Days' sales in inventory days Net Sales Revenue $ 148,000 Cost of Goods Sold: = Beginning…arrow_forward
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage LearningCornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage LearningIndividual Income TaxesAccountingISBN:9780357109731Author:HoffmanPublisher:CENGAGE LEARNING - CONSIGNMENT
- Financial AccountingAccountingISBN:9781337272124Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage LearningFinancial AccountingAccountingISBN:9781305088436Author:Carl Warren, Jim Reeve, Jonathan DuchacPublisher:Cengage Learning