Reference no: EM132805969
Question - A) Compute the cost of inventory on hand at December 31, 2019, based on the conventional retail method.
Lincoln Company converted from the conventional retail method to the LIFO retail method on January 1, 2020, and is now considering converting to the dollar-value LIFO inventory method. During your examination of the financial statements for the year ended December 31, 2021, management requested that you furnish a summary showing certain computations of inventory cost for the past 3 years.
Available information - The inventory at January 1, 2019, had a retail value of $55,500 and cost of $29,500 based on the conventional retail method.
Transactions 2019
|
|
Cost
|
Retail
|
|
Purchase
|
$317,768
|
$544,500
|
|
Purchase returns
|
5,200
|
10,000
|
|
Purchase discounts
|
6,000
|
|
|
Gross sales revenue (after employee discounts)
|
|
550,400
|
|
Sales returns
|
|
9,000
|
|
Employee discounts
|
|
2,900
|
|
Freight-in
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17,500
|
|
|
Net mark-ups
|
|
19,600
|
|
Net markdowns
|
|
11,800
|
The retail value of the December 31, 2020, inventory was $77,000, the cost ratio for 2020 under the LIFO retail method was 63%, and the regional price index was 106% of the January 1, 2020, price level.
The retail value of the December 31, 2021, inventory was $62,000, the cost ratio for 2021 under the LIFO retail method was 62%, and the regional price index was 108% of the January 1, 2020, price level.
B) Next, how do you estimate ending inventory for 2019 assuming the company used the LIFO retail method?
C) Lastly, how do you estimate ending inventory for 2019 using the conventional retail method?