Smith Company Uses the LIFO Retail Inventory Method for Inventory

question 23

Multiple Choice

Smith Company uses the LIFO retail inventory method for inventory costing. Smith Company has beginning inventory with a cost of $60,000 and a retail value of $180,000. During the year, the company purchases goods with a cost basis of $20,000 and a retail basis of $70,000. Sales are $70,000 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 33.3%; new layer 28.57%
• B) beginning inventory 33.3%; new layer 35.71%
• C) beginning inventory 33.3%; new layer 33.3%
• D) beginning inventory 33.3%; new layer 21.43%

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Definitions:

International Companies

Firms that engage in business operations across national borders, often involving manufacturing, sales, or service in multiple countries.

Barter

An ancient form of trade where goods or services are exchanged directly for other goods or services without the use of money as a medium.

Balance of Trade Deficit

An economic measure where a country's imports exceed its exports during a specific time period.

Imports and Exports

The practice of bringing goods and services into a country (imports) and sending goods and services out of a country (exports) to engage in international trade.