Guerra, Inc.adopted the dollar-value LIFO retail inventory method on January 1, 2010, when the price index was 100.The following information was taken from company records on December 31, 2010, when the price index was 110. Cost Retail Sales $ 190 , 000 Additional markps 18 , 000 Markup cancellations 6 , 000 Markdowns 8 , 000 Markdown cancellations 2 , 000 Inventory, January 1 $ 14 , 400 20 , 000 Purchases 158 , 000 199 , 000 Purchase returns 4 , 000 5 , 000 \begin{array}{lll} & ext { Cost} & ext { Retail}\ ext { Sales } & & \$ 190,000 \ ext { Additional markps } & & 18,000 \ ext { Markup cancellations } & & 6,000 \ ext { Markdowns } & & 8,000 \ ext { Markdown cancellations } & & 2,000 \ ext { Inventory, January 1 } & \$ 14,400 & 20,000 \ ext { Purchases } & 158,000 & 199,000 \ ext { Purchase returns } & 4,000 & 5,000\end{array} Sales Additional markps Markup cancellations Markdowns Markdown cancellations Inventory, January 1 Purchases Purchase returns Cost $14 , 400 158 , 000 4 , 000 Retail $190 , 000 18 , 000 6 , 000 8 , 000 2 , 000 20 , 000 199 , 000 5 , 000 Required:Compute the cost of the December 31, 2010, inventory.(Round off calculations to the nearest dollar.)

Question

Guerra, Inc.adopted the dollar-value LIFO retail inventory method on January 1, 2010, when the price index was 100.The following information was taken from company records on December 31, 2010, when the price index was 110.  Cost  Retail  Sales  $ 190 , 000  Additional markps  18 , 000  Markup cancellations  6 , 000  Markdowns  8 , 000  Markdown cancellations  2 , 000  Inventory, January 1  $ 14 , 400 20 , 000  Purchases  158 , 000 199 , 000  Purchase returns  4 , 000 5 , 000 \begin{array}{lll} & 	ext { Cost} & 	ext { Retail}\	ext { Sales }  &   &  \$ 190,000 \	ext { Additional markps }  &   &  18,000 \	ext { Markup cancellations }  &   &  6,000 \	ext { Markdowns }  &   &  8,000 \	ext { Markdown cancellations }  &   &  2,000 \	ext { Inventory, January 1 }  &  \$ 14,400  &  20,000 \	ext { Purchases }  &  158,000  &  199,000 \	ext { Purchase returns }  &  4,000  &  5,000\end{array}  Sales   Additional markps   Markup cancellations   Markdowns   Markdown cancellations   Inventory, January 1   Purchases   Purchase returns  ​  Cost $14 , 400 158 , 000 4 , 000 ​  Retail $190 , 000 18 , 000 6 , 000 8 , 000 2 , 000 20 , 000 199 , 000 5 , 000 ​   Required:Compute the cost of the December 31, 2010, inventory.(Round off calculations to the nearest dollar.)

Stephen Nagatoshi · Accepted Answer

Final Answer :

Cost of inventory = $20, 560, determined as follows: Cost percentages: $Cost of inventory = $20, 560, determined as follows: Cost percentages: \begin{array}{lr} \text {Ending inventory at retal at base year prices: }&30,000 / 1.10=27,273\\ \text { Inventory change at retail at base year prices:}&27,273-20,000=7,273\\ \text {Inventory change at retail at relevant current prices:}&7,273 ' 1.10=8,000\\ \text {Inventory change at current costs: }&8,000 ' 0.77=6,160\\ \end{array} \begin{array}{l} \text { Layers } \\ \text { Cost } \\ \$ 14,400 \\ 6,160 \\\hline \$ 20,560 \end{array}$

8,000′0.77=6,160\begin{array}{lr}\text {Ending inventory at retal at base year prices: }&30,000 / 1.10=27,273\\\text { Inventory change at retail at base year prices:}&27,273-20,000=7,273\\\text {Inventory change at retail at relevant current prices:}&7,273 ' 1.10=8,000\\\text {Inventory change at current costs: }&8,000 ' 0.77=6,160\\\end{array}

$14,4006,160$20,560\begin{array}{l}\text { Layers } \\\text { Cost } \\\$ 14,400 \\6,160 \\\hline\$ 20,560\end{array}

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