Question

Canova Corporation adopted the dollar-value LIFO retail method on January 1, 2018. On that date, the cost of the inventory on hand was $15,000 and its retail value was $18,750. Information for 2018 and 2019 is as follows:Ending Inventoryat Retail Retail PriceIndex Cost-to-RetailPercentageDate12/31/18 $ 25,000 1.25 82 %12/31/19 $ 28,600 1.30 85 %Required:
1. What is the cost-to-retail percentage for the inventory on hand at 1/1/18?
2. Calculate the inventory value at the end of 2018 and 2019 using the dollar-value LIFO retail method.

Answer 1

Answer:

1) 80%

2) The inventory value using the dollar-value LIFO retail method:

At the end of 2018 : $26,250  

At the end of 2019: $24,600

Explanation:

1. The cost-to-retail percentage for the inventory on hand at 1/1/18 = inventory on hand of $15,000/ retail value of $18,750 x 100% = 80%

2. Please see the calculation for question 2 in excel attached