Question & Answer: Harvey's Junk Jewelry started business January 1, 2016, and uses the LIFO retail method to estimate ending inv…..

Harvey’s Junk Jewelry started business January 1, 2016, and uses the LIFO retail method to estimate ending inventory. Listed below is data accumulated for the year ended December 31, 2016:

Cost Retail
Beginning inventory $15,000 $23,000
Purchases 49,000 78,000
Freight-in 2,500
Purchase returns 1,700 2,600
Net markups 2,000
Net markdowns 4,100
Net sales 70,600
Employee discounts 700

The denominator for the current period’s cost-to-retail percentage is:

$96,300.

$73,300.

$101,000.

$81,500.

Expert Answer

 

Cost Retail
Beginning inventory 15000 23000
Plus: Purchases 49000 78000
Freight-in 2500
Less: Purchases returns -1700 -2600
Plus: Net markups 2000
Less: Net markdowns -4100
Goods available for sale (excluding beginning inventory) 49800 73300
Option 2 is correct
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