retail - Retail Method Illustrative Problem As of January 1...

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Retail Method Illustrative Problem As of January 1, 2008, Retail Company installed the retail method of accounting for its merchandise inventory. To prepare the store’s financial statements at June 30, 2008, you obtain the following data. Cost Selling Price Inventory, January 1 $ 30,000 $ 43,000 Markdowns 10,500 Markups 9,200 Markdown cancellations 6,500 Markup cancellations 3,200 Purchases 108,800 155,000 Sales 159,000 Purchase returns 2,800 4,000 Sales returns and allowances 8,000 Instructions: (a) Prepare a schedule to compute the company’s June 30, 2008, inventory under the following retail methods of accounting for inventories: (i) conventional (ii) simple average (iii) FIFO (iv) LIFO (stable prices). (b) Without prejudice to your solution to part (a), assume that you computed the June 30, 2008, inventory to be $54,000 at retail and the appropriate ratio of cost to retail to be 70%. The general price level has increased from 100 at January 1, 2008, to 108 at June 30, 2008. Prepare a schedule to compute the June 30, 2008 inventory at the June 30 price level under the dollar-value LIFO retail method.
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