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Question 12 BE

Expert-verified
Intermediate Accounting (Kieso)
Found in: Page 475

Short Answer

Use the information for Boyne Inc. from BE9-10. Compute ending inventory at cost using the LIFO retail method.

The ending inventory at cost equals $30,033.60.

See the step by step solution

Step by Step Solution

Calculation of ending inventory at retail

Inventory value at retail is calculated as follows:

Cost

Retail

Beginning inventory

$12,000

$20,000

Add: Net Purchases

120,000

170,000

Add: Net Markups

10,000

Less: Net Markdowns

______

7,000

Total (Excluding beginning inventory)

$120,000

$173,000

Total (Including beginning inventory)

$132,000

$193,000

Less: Sales

147,000

Ending inventory at retail

$46,000

Calculation of cost-to-retail ratio of beginning inventory

The cost-to-retail ratio of beginning inventory is calculated as follows:

Calculation of cost-to-retail ratio of total excluding beginning inventory

The cost-to-retail ratio of total excluding beginning inventory is calculated as follows:

Calculation of ending inventory at cost

Ending inventory at retail equals $46,000, which includes $20,000 of beginning inventory and the remaining $26,000 from next purchases.

The ending inventory at cost is calculated as follows:

Ending Inventory at Retail

Layers at Retail Prices

Cost to Retail Ratio

Ending Inventory at LIFO Cost

$46,000

$20,000

x

60%

=

$12,000

$26,000

x

69.36%

=

$18,033.60

$30,033.60

Thus, ending inventory at cost equals $30,033.60.

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