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AccountingIntermediate Accounting: Reporting And Analysis3rd Edition

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Chapter 8, Problem 15E
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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

Solutions

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Problem 1GI
Problem 2GI
Problem 3GI
Problem 4GI
Problem 5GI
Problem 6GI
Problem 7GI
Problem 8GI
Problem 9GI
Problem 10GI
Problem 11GI
Problem 12GI
Problem 13GI
Problem 14GI
Problem 15GI
Problem 16GI
Problem 17GI
Problem 18GI
Problem 19GI
Problem 20GI
Problem 21GI
Problem 1MC
Problem 2MC
Problem 3MC
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Problem 5MC
Problem 6MC
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Problem 10MC
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Problem 8RE
Problem 9RE
Problem 10RE
Problem 11RE
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Problem 14RE
Problem 1E
Problem 2E
Problem 3E
Problem 4E
Problem 5E
Problem 6E
Problem 7E
Problem 8E
Problem 9E
Problem 10E
Problem 11E
Problem 12E
Problem 13E
Problem 14E
Problem 15E
Problem 16E
Problem 17E
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Problem 10P
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Problem 14P
Problem 15P
Problem 16P
Problem 1C
Problem 2C
Problem 3C
Problem 4C
Problem 5C
Problem 6C
Problem 7C
Problem 8C
Problem 10C
Problem 11C
BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Dollar-Value LIFO Retail Wyatt Company adopts the dollar-value LIFO retail inventory method on January 1, 2019. The company’s records reveal that the inventory on January 1, 2019, had a cost of $75,000 and a retail value of $120,000. During 2019, the cost of purchases made was $110,000, and the retail value was $165,000. In addition, net markdowns were $6,000, net additional markups were $8,000, and sales were $147,000. The price index on January 1, 2019, was 100, and the index for 2019 was 110.

Required:

Compute the cost of inventory on December 31, 2019. Round the cost-to-retail ratio to 3 decimal places.

To determine

Calculate the cost of ending inventory using the dollar-value LIFO retail inventory method.

Explanation

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 using the dollar-value LIFO retail inventory method.

Step 1: Calculate the amount of estimated ending inventory at retail.

DetailsCost ($)Retail ($)
Beginning inventory75,000120,000
Add:  Net purchase110,000165,000
          Net additional markups 8,000
Less:  Net additional markdowns  0(6,000)
Goods available for sale – Excluding beginning inventory110,000167,000
Goods available for sale – Including beginning inventory185,000287,000
Less:  Net sales (147,000)
Estimated ending inventory at current year retail prices $140,000

Table (1)

Step 2:  Calculate increase in retail inventory at base-year prices.

(i)

Calculate retail price converted to base-year prices:

Retail price converted to base-year prices }=[ Ending inventory at retail×(Price index on 1/1/16Price index on 31/12/16)]=[$140,000×(100110)]=$127,273

(ii)

Calculate increase in retail inventory at base-year prices.

Increase in retail inventory at base-year prices }= (Retail price converted to base-year price− Beginning inventory at retail)=($127,273−$120,000)=$7,273

Step 3: Calculate ending inventory at retail

Ending inventory at retail consists of price index on January 1, 2019 and December 31, 2019:

(i)

Calculate ending inventory at retail consist of price index on January 1, 2019.

Ending inventory at retail consists of price index on January 1, 2019 }=[Beginning inventory at retail×(Price index on 1/1/19Price index on 1/1/19)]=[$120,000×(100100)]=$120,000

(ii)

Calculate ending inventory at retail consist of price index on December 31, 2019

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Ch-8 P-1GICh-8 P-2GICh-8 P-3GICh-8 P-4GICh-8 P-5GICh-8 P-6GICh-8 P-7GICh-8 P-8GICh-8 P-9GICh-8 P-10GI
Ch-8 P-11GICh-8 P-12GICh-8 P-13GICh-8 P-14GICh-8 P-15GICh-8 P-16GICh-8 P-17GICh-8 P-18GICh-8 P-19GICh-8 P-20GICh-8 P-21GICh-8 P-1MCCh-8 P-2MCCh-8 P-3MCCh-8 P-4MCCh-8 P-5MCCh-8 P-6MCCh-8 P-7MCCh-8 P-8MCCh-8 P-9MCCh-8 P-10MCCh-8 P-1RECh-8 P-2RECh-8 P-3RECh-8 P-4RECh-8 P-5RECh-8 P-6RECh-8 P-7RECh-8 P-8RECh-8 P-9RECh-8 P-10RECh-8 P-11RECh-8 P-12RECh-8 P-13RECh-8 P-14RECh-8 P-1ECh-8 P-2ECh-8 P-3ECh-8 P-4ECh-8 P-5ECh-8 P-6ECh-8 P-7ECh-8 P-8ECh-8 P-9ECh-8 P-10ECh-8 P-11ECh-8 P-12ECh-8 P-13ECh-8 P-14ECh-8 P-15ECh-8 P-16ECh-8 P-17ECh-8 P-18ECh-8 P-19ECh-8 P-1PCh-8 P-2PCh-8 P-3PCh-8 P-4PCh-8 P-5PCh-8 P-6PCh-8 P-7PCh-8 P-8PCh-8 P-9PCh-8 P-10PCh-8 P-11PCh-8 P-12PCh-8 P-13PCh-8 P-14PCh-8 P-15PCh-8 P-16PCh-8 P-1CCh-8 P-2CCh-8 P-3CCh-8 P-4CCh-8 P-5CCh-8 P-6CCh-8 P-7CCh-8 P-8CCh-8 P-10CCh-8 P-11C

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