Chapter 9: Question 12 BE (page 475)

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

Short Answer

Expert verified

The ending inventory at cost equals $30,033.60.

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:

$\begin{array}{rcl} Cost to retail ratio at begginnig inventory & = & \frac{Beginning inventory at cost}{Beginning inventory at retail} \times 100 \\ = & \frac{$ 12, 000}{$ 20, 000} \times 100 \\ = & 60 % \end{array}$

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:

$\begin{array}{rcl} Cost to retail ratio of excluding beginning inventory & = & \frac{Excluding Beginning Inventory at Cost}{Excluding Beginning Inventory at Retail} \times 100 \\ = & \frac{$ 120, 000}{$ 173, 000} \times 100 \\ = & 69.36 % \end{array}$

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

Short Answer

Step by step solution

Calculation of ending inventory at retail

Calculation of cost-to-retail ratio of beginning inventory

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

Calculation of ending inventory at cost

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