Geese Company utilizes the LIFO retail inventory method. Its cost-to-retail percentage is 60% based on beginning inventory and 64% based on current-period purchases. The company determined that beginning inventory at retail was $200,000 and that during the current period a new layer was added with retail value of $50,000. The cost of ending inventory should be

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abiolataiwo2015 abiolataiwo2015 · Answer 1 · 2020-08-12T08:22:11+02:00

Answer:

$152,000

Explanation:

Calculation for the cost of the ending inventory

First step is to calculate the cost-to-retail percentage of the beginning inventory amount

Using this formula

Beginning Inventory =Cost-to-retail percentage*Beginning inventory at retail

Let plug in the formula

Beginning Inventory =60%*$200,000

Beginning Inventory =$120,000

Second step is to calculate current-period purchases percentage of the new layer amount

Using this formula

Current period purchases= Purchases percentage* New layer

Let plug in the formula

Current period purchases=64%*50,000

Current period purchases=$32,000

The last step is to find the cost of the ending inventory using this formula

Ending inventory cost=Beginning Inventory+Current period purchases

Let plug in the formula

Ending inventory cost=$120,000+$32,000

Ending inventory cost=$152,000

Therefore the cost of the ending inventory will be $152,000