Question

In: Accounting

On January 1, year 1, Silver Industries Inc. adopted the dollar-value LIFO method of determining inventory...

On January 1, year 1, Silver Industries Inc. adopted the dollar-value LIFO method of determining inventory costs for financial and income tax reporting. The following information relates to this change:

Silver has continued to use the FIFO method, which approximates current costs, for internal reporting purposes. Silver's FIFO inventories at December 31, year 1, year 2, and year 3 were $100,000, $137,500, and $195,000, respectively.

The FIFO inventory amounts are converted to dollar-value LIFO amounts using a single inventory pool and cost indices developed using the link-chain method. Silver estimated that the current year cost change indices, which measure year-to-year cost changes, were 1.25 for year 2 and 1.20 for year 3.

Complete the following schedule by double-clicking in the associated shaded cell and entering the appropriate value. Enter all amounts as positive values. Enter index values to two decimal places.

Year

FIFO inventory

Current year cost change index

Link-chain cost index

Inventory at base year costs

1

$100,000

1.00

1.00

$100,000

2

137,500

1.25

[1____]

[2____]

3

195,000

1.20

[3____]

[4____]

Year

LIFO inventory layers at base year costs

Link-chain cost index

Year 2 dollar-value LIFO inventory

Year 3 dollar-value LIFO inventory

1

$100,000

1.00

$100,000

$100,000

2

[5____]

[6____]

[7____]

[8____]

3

[9____]

[10___]

[11___]

[12___]

[13___]

[14___]


Note: Please enter your responses below. Find a way to make them correspond with the number within the table and separate them with semicolons. Use the following examples for [1____], [2____], and [3____] as a reference for formulating your responses:

Example A: (1)555,000; (2)90,555; (3)1,234;
Example B: 1--555,000; 2--90,555; 3--1,234;
Example C: 1 = 555,000; 2 = 90,555; 3 = 1,234;

Be sure that your answers are clear to your Instructor with whichever method you choose.

Solutions

Expert Solution

To calculate Chain cost index we will multiply current year year indices with last year indices.

year 1 = 1.00*1.00 = 1.00

year 2 = 1.00*1.25 = 1.25

year 3 = 1.20*1.25.=1.50

Now to calculate base year costs , we will divide fifo inventory with chain indices

year 1 = 100000/1.00 = 100000

year 2 = 137500/1.25 = 110000

year 3 = 195000/1.50 = 130000

Now to calculate layers we will deduct last year base cost from current year base inventory

year 1 = 100000-0 = 100000

year 2 = 110000 - 100000 = 10000

year 3 = 130000 - 110000 = 20000

Now to calculate lifo inventory we will multiply sepecific layers with that year cost indicices.

Year Fifo inventory Current year cost change ind. Link chain cost indices Inventory at base year
1 100000 1.00 1.00 100000
2 137500 1.25 1.25 110000
3 195000 1.20 1.5 130000
Year Lifo inventory Layers @ base year Link chain cost indices Year 2 dollor value lifo inventory Year 3 dollor value lifo inventory
1 100000 1.00 100000 100000
2 10000 1.25 12500 12500
3 20000 1.50 nil 30000
TOTAL 112500 142500

Related Solutions

QUESTION 24 Dollar-Value LIFO Inventory: On January 1, year 1, Silver Industries Inc. adopted the dollar-value...
QUESTION 24 Dollar-Value LIFO Inventory: On January 1, year 1, Silver Industries Inc. adopted the dollar-value LIFO method of determining inventory costs for financial and income tax reporting. The following information relates to this change: Silver has continued to use the FIFO method, which approximates current costs, for internal reporting purposes. Silver's FIFO inventories at December 31, year 1, year 2, and year 3 were $100,000, $137,500, and $195,000, respectively. The FIFO inventory amounts are converted to dollar-value LIFO amounts...
Webster Products, Inc., adopted the dollar-value LIFO method of determining inventory costs
Webster Products, Inc., adopted the dollar-value LIFO method of determining inventory costs for financial and income tax reporting on January 1, 2021. Webster continues to use the FIFO method for internal decision-making purposes. Webster’s FIFO inventories at December 31, 2021, 2022, and 2023, were $300,000, $412,500, and $585,000, respectively. Internally generated cost indexes are used to convert FIFO inventory amounts to dollar-value LIFO amounts. Webster estimated these indexes as follows:  2021................1.00  2022.................1.25  2023.................1.50    Required:  1. Determine Webster’s dollar-value LIFO inventory...
On January 1, 2016, Badger Inc. adopted the dollar-value LIFO method. The inventory cost on this...
On January 1, 2016, Badger Inc. adopted the dollar-value LIFO method. The inventory cost on this date was $114,000. The 2016 ending inventory, valued at year-end costs, was $165,000. The relative cost index for this inventory in 2016 was 1.20.    Suppose that Badger's 2017 ending inventory, valued at year-end costs, was $176,400 and that the relative cost index for this inventory in 2017 was 1.26. In determining the inventory balance should Badger report in its 12/31/17 balance sheet:
1/ On January 1, 2018, Badger Inc. adopted the dollar-value LIFO method. The inventory cost on...
1/ On January 1, 2018, Badger Inc. adopted the dollar-value LIFO method. The inventory cost on this date was $100,300. The ending inventory, valued at year-end costs, and the relative cost index for each of the next three years is below: Year-end Ending inventory at year-end costs Cost Index 2018 $ 126,945 1.05 2019 144,320 1.10 2020 154,860 1.20 In determining the inventory balance should Badger report in its 12/31/2019 balance sheet: Multiple Choice An additional layer of $23,330 is...
On January 1, 2021, Avondale Lumber adopted the dollar-value LIFO inventory method. The inventory value for...
On January 1, 2021, Avondale Lumber adopted the dollar-value LIFO inventory method. The inventory value for its one inventory pool on this date was $275,000. An internally generated cost index is used to convert ending inventory to base year. Year-end inventories at year-end costs and cost indexes for its one inventory pool were as follows: Year Ended Inventory Cost Index December 31 Year-End Costs (Relative to Base Year) 2021 $ 364,350 1.05 2022 374,960 1.09 2023 424,600 1.10 2024 454,260...
On January 1, 2021, Avondale Lumber adopted the dollar-value LIFO inventory method. The inventory value for...
On January 1, 2021, Avondale Lumber adopted the dollar-value LIFO inventory method. The inventory value for its one inventory pool on this date was $330,000. An internally generated cost index is used to convert ending inventory to base year. Year-end inventories at year-end costs and cost indexes for its one inventory pool were as follows: Year Ended Inventory Cost Index December 31 Year-End Costs (Relative to Base Year) 2021 $ 418,080 1.04 2022 429,840 1.08 2023 482,870 1.09 2024 520,240...
On January 1, 2018, Avondale Lumber adopted the dollar-value LIFO inventory method. The inventory value for...
On January 1, 2018, Avondale Lumber adopted the dollar-value LIFO inventory method. The inventory value for its one inventory pool on this date was $350,000. An internally generated cost index is used to convert ending inventory to base year. Year-end inventories at year-end costs and cost indexes for its one inventory pool were as follows: Year Ended Inventory Cost Index December 31 Year-End Costs (Relative to Base Year) 2018 $ 438,780 1.03 2019 451,540 1.07 2020 508,680 1.08 2021 548,895...
On January 1, 2017, Flounder Wholesalers Inc. adopted the dollar-value LIFO inventory method for income tax...
On January 1, 2017, Flounder Wholesalers Inc. adopted the dollar-value LIFO inventory method for income tax and external financial reporting purposes. However, Flounder continued to use the FIFO inventory method for internal accounting and management purposes. In applying the LIFO method, Flounder uses internal conversion price indexes and the multiple pools approach under which substantially identical inventory items are grouped into LIFO inventory pools. The following data were available for inventory pool no. 1, which comprises products A and B,...
On January 1, 2020, Wildhorse Wholesalers Inc. adopted the dollar-value LIFO inventory method for income tax...
On January 1, 2020, Wildhorse Wholesalers Inc. adopted the dollar-value LIFO inventory method for income tax and external financial reporting purposes. However, Wildhorse continued to use the FIFO inventory method for internal accounting and management purposes. In applying the LIFO method, Wildhorse uses internal conversion price indexes and the multiple pools approach under which substantially identical inventory items are grouped into LIFO inventory pools. The following data were available for inventory pool no. 1, which comprises products A and B,...
On January 1, 2020, Blue Wholesalers Inc. adopted the dollar-value LIFO inventory method for income tax...
On January 1, 2020, Blue Wholesalers Inc. adopted the dollar-value LIFO inventory method for income tax and external financial reporting purposes. However, Blue continued to use the FIFO inventory method for internal accounting and management purposes. In applying the LIFO method, Blue uses internal conversion price indexes and the multiple pools approach under which substantially identical inventory items are grouped into LIFO inventory pools. The following data were available for inventory pool no. 1, which comprises products A and B,...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT