Question

Data for Cullumber Company is given below:

a. Cullumber Company has a beginning inventory in year one of $1,355,000 and an ending inventory of $1,650,000. The price level has increased from 100 at the beginning of the year to 110 at the end of year one. Calculate the ending inventory under the dollar-value LIFO method.

Ending inventory

b. At the end of year two, Cullumber's inventory is $1,863,000 in terms of a price level of 115 which exists at the end of year two. Calculate the inventory at the end of year two continuing the use of the dollar-value LIFO method.

Ending inventory

$

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Answer 1

				Amount in Dollar
Date	Ending Inventory at base Year Cost	Inventory at base year Cost	Inventory layers converted to cost	Ending Inventory LIFO cost
Beginning	(1,355,000/1)=1,355,000	1,355,000	(1355000 X 1)	1,355,000
Inventory at beginning of year			1,355,000
End of Year 1	(1650000/1.1)=1,500,000	1355000(Base)	(1355000 X 1)	1,355,000
		145,000	(145000 X 1.1)	159,500
		(1500000-1355000)
		Year 1
Ending inventory year I			1,514,500	(1355000+159500)
End of year 2	(1863000/1.15)=1620,000	1355000(Base)	(1355000 X 1)	1,355,000
		145,000	(145000 X 1.1)	159,500
		(Year 1)
		120,000	(120000 X 1.15)	138,000
		(1620000-145000-120000)
		(Year 2)
Ending inventory year II			1,652,500	(1355000+159500+138000)