The Jensen Store has the following data for inventory: $$\begin{array} { | l | r | r | }
\hline & \text { Cost } & \text { Retail } \
\hline \text { Inventory, January 1 } & \$ 230,000 & \$ 350,000 \
\hline \text { Purchases for January } & 370,000 & 480,000 \
\hline \text { Sales for January } & & 430,000 \
\hline
\end{array}$$
The store uses the dollar-value LIFO retail method. The price index for the year is 1.08. The price index that pertains to the beginning inventory is 1.00. What is the retail value of the ending inventory at January 31?
A) $400,000
B) $600,000
C) $910,000
D) $830,000

Question

The Jensen Store has the following data for inventory: $$\begin{array} { | l | r | r | } 
\hline & \text { Cost } & \text { Retail } \
\hline \text { Inventory, January 1 } & \$ 230,000 & \$ 350,000 \
\hline \text { Purchases for January } & 370,000 & 480,000 \
\hline \text { Sales for January } & & 430,000 \
\hline
\end{array}$$
 The store uses the dollar-value LIFO retail method. The price index for the year is 1.08. The price index that pertains to the beginning inventory is 1.00. What is the retail value of the ending inventory at January 31?
A) $400,000
B) $600,000
C) $910,000
D) $830,000

Quizplus · Accepted Answer

The retail value of the ending inventory is $400,000. The dollar-value LIFO retail method uses the retail price index to adjust the cost of the ending inventory to current prices. The retail price index for the year is 1.08, which means that prices have increased by 8% since the beginning of the year. The price index that pertains to the beginning inventory is 1.00, which means that prices have not changed since the beginning of the year. Therefore, the cost of the ending inventory must be adjusted by 8% to reflect the current prices. The cost of the ending inventory is $230,000 + $370,000 - $430,000 = $170,000. The retail value of the ending inventory is $170,000 x 1.08 = $400,000.

The Jensen Store Has the Following Data for Inventory The Store Uses the Dollar-Value LIFO Retail Method