A company using the LIFO retail method has the following information for the current year's operations:

Cost

Retail

Beginning inventory

$

50,000

$

80,000

Net purchases during the year

425,000

740,000

Net sales

710,000

To convert ending inventory to cost, management calculates the cost-to-retail percentage as cost of $475,000 ($50,000 + $425,000) divided by retail of $820,000 ($80,000 + $740,000). Which of the following statements is correct?

Multiple Choice

The calculation of the cost-to-retail percentage is correct.

Only net purchases during the year are used to calculate the cost-to-retail percentage to convert ending inventory to cost.

Separate cost-to-retail percentages for beginning inventory and net purchases are needed to convert ending inventory to cost.

The retail amount used to calculate the cost-to-retail percentage should be $110,000 ($80,000 + $740,000 $710,000).