Question
Alquist Company uses the retail method to estimate its ending inventory. Selected information about its year 2016 operations is as follows: a. January 1, 2016,
Alquist Company uses the retail method to estimate its ending inventory. Selected information about its year 2016 operations is as follows: a. January 1, 2016, beginning inventory had a cost of $400,000 and a retail value of $300,000. b. Purchases during 2016 cost $1,955,000 with an original retail value of $3,800,000. c. Freight costs were $25,000 for incoming merchandise. d. Net additional markups were $150,000 and net markdowns were $650,000. e. Based on prior experience, shrinkage due to shoplifting was estimated to be $30,000 of retail value. f. Merchandise is sold to employees at a 25% of selling price discount. Employee sales are recorded in a separate account at the net selling price. The balance in this account at the end of 2016 is $360,000. g. Sales to customers totaled $2,750,000 for the year. Required: 1. Estimate ending inventory and cost of goods sold using the conventional retail method. 2. Estimate ending inventory and cost of goods sold using the LIFO retail method. (Assume stable prices.)
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