Question
Cheyenne Stores Inc., which uses the conventional retail inventory method, wishes to change to the LIFO retail method beginning with the accounting year ending December
Cheyenne Stores Inc., which uses the conventional retail inventory method, wishes to change to the LIFO retail method beginning with the accounting year ending December 31, 2020. Amounts as shown below appear on the stores books before adjustment.
Cost | Retail | |||
Inventory, January 1, 2020 | $14,537 | $25,200 | ||
Purchases in 2020 | 116,088 | 199,800 | ||
Markups in 2020 | 12,500 | |||
Markdowns in 2020 | 5,000 | |||
Sales revenue in 2020 | 189,700 |
You are to assume that all markups and markdowns apply to 2020 purchases, and that it is appropriate to treat the entire inventory as a single department. Compute the inventory at December 31, 2020, under the following methods.
A. The conventional retail method.
Ending inventory using the conventional retail method |
B. The last-in, first-out retail method, effecting the change in method as of January 1, 2020. Assume that the cost-to-retail percentage for 2019 was recomputed correctly in accordance with procedures necessary to change to LIFO. This ratio was 62%.
Ending inventory using the last-in, first-out retail method |
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