On March 1, Year 1, LuxWear Inc. had beginning inventory and purchases, at cost, of $50,000 and $20,000, respectively. The beginning inventory and purchases had a retail value of $75,000 and $30,000, respectively. The company had sales of $60,000, as well as markups of $6,000 and markdowns of $10,000. What would LuxWear report as the lower of cost or market for its ending inventory on March 31, Year 1 using the conventional (LCM) retail method? (Round the cost-to-retail ratio to two decimal places.)

Question

Business

Vivian Bishop

18 August, 12:54

On March 1, Year 1, LuxWear Inc. had beginning inventory and purchases, at cost, of $50,000 and $20,000, respectively. The beginning inventory and purchases had a retail value of $75,000 and $30,000, respectively. The company had sales of $60,000, as well as markups of $6,000 and markdowns of $10,000. What would LuxWear report as the lower of cost or market for its ending inventory on March 31, Year 1 using the conventional (LCM) retail method? (Round the cost-to-retail ratio to two decimal places.)

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Answers (1)

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Kingston Roberson · Answer 1

Answer: $25,830

Explanation:

Description

Cost

Retail

Beginning inventory

$50,000

$ 75,000

Purchases

20,000

30,000

Markups

0

6,000

Subtotal

$70,000

$111,000

Cost-to-retail ratio:

$70,000/$111,000 = 63%

Markdowns

0

(10,000)

Goods available for sale

$70,000

$101,000

Less: Sales at retail

(60,000)

Ending inventory at retail

$ 41,000

Ending inventory at lower of cost or market:

$41,000 x 63% =

$25,830