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Harlequin Co. adopted the dollar-value LIFO retail method at the beginning of 2021 (its base year). Its beginning inventory for 2021 was $38,500 at cost and $74,500 at retail prices. At the end of 2021, it computed its estimated ending inventory at retail to be $115,000. Assuming its cost-to-retail percentage for 2021 transactions was 40%, and that the retail price index at the end of 2021 was 1.3, what is the inventory balance that Harlequin Co. would report in its 12/31/2021 balance sheet?

Answer :

abiolataiwo2015

Answer:

$ 64,480.00

Explanation:

Calculation for what is the inventory balance that Harlequin Co. would report in its 12/31/2021 balance sheet

First step is to calculate the price index

Price index=(1.3*40%)

Price index=0.52

Second step is to calculate the ending value as per inflation

Ending value as per inflation=[(40%*115,000 / 0.52)-40%*115,000]

Ending value as per inflation=[(46,000 / 0.52)-46,000]

Ending value as per inflation=88,461.54-46,000

Ending value as per inflation=49,961.54

Third step is to calculate the Gross up value

Gross up value=49,961.54*0.52

Gross up value=$25,980.00

Now let calculate the the inventory balance using this formula

Inventory balance= Beginning inventory value + Gross up value

Let plug in the formula

Inventory balance=$ 38,500.00+ $25,980.00

Inventory balance=$ 64,480.00

Therefore the inventory balance that Harlequin Co. would report in its 12/31/2021 balance sheet will be $ 64,480.00

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