In: Accounting
QUESTION 24
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___] |
|
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 |