As of January 1, 2017, Aristotle Inc. adopted the retail method of accounting for its merchandise inventory.
To prepare the store’s financial statements at June 30, 2017, 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 104,800 155,000
Sales revenue 154,000
Purchase returns 2,800 4,000
Sales returns and allowances 8,000
Instructions
(a) Prepare a schedule to compute Aristotle’s June 30, 2017, inventory under the conventional retail method of accounting for inventories.
(b) Without prejudice to your solution to part (a), assume that you computed the June 30, 2017, inventory to be $59,400 at retail and the ratio of cost to retail to be 70%. The general price level has increased from 100 at January 1, 2017, to 108 at June 30, 2017. Prepare a schedule to compute the June 30, 2017, inventory at the June 30 price level under the dollarvalue LIFO retail method.
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