1. Harlequin Co. has used the LIFO retail method since it began

operations in early 2015 (its base year). Its beginning inventory for 2016 was

$36,000 at cost and $72,000 at retail prices. At the end of 2016, it computed its

estimated ending inventory at retail to be $120,000. Assuming its cost-to-retail

percentage for 2016 transactions was 60%, what is the inventory balance that

Harlequin Co. would report in its 12/31/16 balance sheet? Hint: $64,800

2. Using the data from #1 assume Harlequin uses the dollar-value LIFO retail

method instead and that the retail price index for 2016 was 1.20. What is the

inventory balance that Harlequin would report in its 12/31/16 balance sheet? Hint: $56,160

3. Sun Co. uses a periodic inventory system. Beginning inventory on Jan. 1 was overstated by $32,000, and its ending inventory on December 31 was understated by $62,000. These errors were not discovered until the next year. So, cost of goods sold for this year was: Hint: Overstated by $94,000

4.

Data related to the inventories of Alpine Ski Equipment is shown below:

	Skis	Boots	Apparel	Supplies
Selling price	$180,000	$150,000	$120,000	$60,000
Cost	128,000	133,000	90,000	45,000
Replacement cost	120,000	130,000	110,000	41,000
Sales commission	10%	10%	10%	10%
Normal gross profit ratio	20%	20%	15%	15%

A. In applying the LCM rule, the inventory of skis would be valued at: Hint: $126,000

B. In applying the LCM rule, the inventory of boots would be valued at: Hint: $130,000

5. Nu Company reported the following pretax data for its FIRST year of operations:

Net Sales $2,800

Cost of goods available for sale 2,500

Operating expenses 880

Effective tax rate 40%

Ending inventory:

if FIFO is elected 1,060

if LIFO is elected 820

A. What is Nu Companys net income if it elects FIFO? Hint: $288

B. What is Nu Companys net income if it elects LIFO? Hint: $144