1.
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.
To Determine: the cost-to-retail percentage for the inventory on hand at 1/1/2018.
1.
Explanation of Solution
Determine the cost-to-retail percentage for the inventory on hand at 1/1/2018.
Therefore, the cost-to-retail percentage for the inventory on hand at 1/1/2018 is 80%.
2.
To Calculate: the inventory value at the end of 2018 and 2019 using the dollar-value LIFO retail method.
2.
Explanation of Solution
Calculate the inventory value at the end of 2018 and 2019 using the dollar-value LIFO retail method.
Ending inventory at dollar-value LIFO retail cost (2018) | ||||
Step 1 | Step 2 | Step 3 | ||
Ending inventory at year-end retail prices ($) | Ending inventory at base year retail prices ($) | Inventory layers at base year retail prices ($) | Inventory layers converted to cost ($) | |
25,000 | 20,000 (1) | 18,750 (Base)(5) | 15,000 (8) | |
1,250 (2018)(7) | 1,281(10) | |||
Total ending inventory at dollar-value LIFO retail cost | $16,281 |
Table (1)
Ending inventory at dollar-value LIFO retail cost (2019) | ||||
Step 1 | Step 2 | Step 3 | ||
Ending inventory at year-end retail prices ($) | Ending inventory at base year retail prices ($) | Inventory layers at base year retail prices ($) | Inventory layers converted to cost ($) | |
28,600 | 22,000 (2) | 18,750 (Base)(3) | 15,000 (6) | |
1,250 (2018)(4) | 1,281(7) | |||
2,000 (2019) (5) | 2,210 (8) | |||
Total ending inventory at dollar-value LIFO retail cost | $18,491 |
Table (2)
Working notes:
Calculate the amount of ending inventory at base year retail prices.
Calculate the amount of inventory layers at base year retail prices.
Calculate the amount of inventory layers at current year retail prices.
Calculate the amount of inventory layers at current year retail prices.
Calculate the amount of inventory layers converted to cost (Base).
Calculate the amount of inventory layers converted to cost (2018).
Calculate the amount of inventory layers converted to cost (2019).
Therefore, the inventory value at the end of 2018 and 2019 using the dollar-value LIFO retail method are $16,281 and $18,491.
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Chapter 9 Solutions
INTERMEDIATE ACCOUNTING RMU 9TH EDITION
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