BuyFindarrow_forward

Intermediate Accounting: Reporting...

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

Solutions

Chapter
Section
BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
162 views

Use the information in RE8-7. Calculate Uncle Butch’s Hunting Supply Shop’s ending inventory using the retail inventory method under the LIFO cost flow assumption. Round the cost to-retail ratio to 3 decimal places.

Uncle Butch’s Hunting Supply Shop reports the following information related to inventory:

Chapter 8, Problem 9RE, Use the information in RE8-7. Calculate Uncle Butchs Hunting Supply Shops ending inventory using the

Calculate Uncle Butch’s’ ending inventory using the retail inventory method under the FIFO cost flow assumption. Round the cost-to-retail ratio to 3 decimal places.

To determine

Compute the ending inventory using the retail inventory method under the LIFO cost flow assumption.

Explanation

Retail inventory method: This method is like a gross profit method. It is depends on the relationship between cost and selling price of the product , for the purpose of estimate the value of ending inventory and cost of goods sold.

It takes into account all the retail amounts that is, the current selling prices. Under this method, the goods available for sale, at retail is deducted from the sales, at retail to determine the ending inventory, at retail.

LIFO: 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.

Compute the ending inventory using the retail inventory method under the LIFO cost flow assumption.

Ending Inventory - LIFO
DetailsCost ($)Retail ($)
Beginning inventory35,00092,000
 
Purchase75,000200,000
Net additional markups 15,000
Less:  Net markdowns 0(22,000)
 Goods available for sale after markdowns75,000193,000
 35,00092,000
Goods available for sale110,000285,000
Less: Sales (178,000)
Estimated ending inventory at retail $107,000
Estimated ending inventory at LIFO cost:  
     Beginning layer34,960 
     New layer5,835 
Total$40,795 

Table (1)

Working note 1:

Calculate ending inventory at cost for beginning layer.

Step 1: Calculate cost-to-retail ratio (Beginning layer).

Cost-to-retail ratio= (Beginning inventory for costBeginning inventory for retail)=($35,000$92,000)=

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

Identify the activities associated with each phase.

Foundations of Business (MindTap Course List)

YIELD CURVES Yields on U.S. Treasury securities were as follows: Term Rate 6 months 5.1% 1 year 5.5 2 years 5.6...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)