On January 1, 2021, the Coldstone Corporation adopted the LIFO retail inventory method. Beginning inventory at cost and at retail were $180,000 and $300,000, respectively. Suppose the retail values of inventory and the cost-to-retail percentages are as follows:
Retail value of inventory Cost-to-retail %
12/31/2021 $375,000 2021 65%
12/31/2022 $220,000 2022 66%
What is the cost of inventory balance that Coldstone would report in its 12/31/2022 balance sheet?
a) $132,000.
b) $126,450.
c) $134,200.
d) $145,200.

D. $145,200

Explanation:

From the scenario, it is observed that the Coldstone Corporation adopted the LIFO retail inventory method. This implies that the company believes that the goods sold first are the ones acquired recently. From the scenario given, we see that the retail value and cost-to-retail percentage have been given.

Therefore, to calculate the retail percentage, we use the formula

                      Cost of good ÷ Retail value

To find the cost of inventory balance that Coldstone would report, we would multiply the cost-to-retail percentage with the given retail value.

Therefor,  for 12/31/200 the cost of inventory would be:

$220,000 × 66% = $145,200

The cost of inventory balance that Coldstone would report in its 12/31/2022 balance sheet is $145,200.

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