Smith Company uses the LIFO retail inventory method for inventory costing.Smith Company has beginning inventory with a cost of $20,000 and a retail value of $40,000.During the year,the company purchases goods with a cost basis of $80,000 and a retail basis of $100,000.Sales are $60,000 at retail.Net markups are $5,000 and net markdowns are $5,000.Under the LIFO retail inventory method,which cost-to-retail ratios are used to determine the cost of ending inventory?
A)beginning inventory 50%; new layer 80%
B)beginning inventory 50%; new layer 71.4%
C)beginning inventory 50%; new layer 50%
D)beginning inventory 50%; new layer 76.2%

Question

Quizplus · Accepted Answer

The beginning inventory cost-to-retail ratio is 50% ($20,000/$40,000). The new layer cost-to-retail ratio is 80% ($80,000/$100,000).

Smith Company Uses the LIFO Retail Inventory Method for Inventory