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DV LIFO: Conway Company uses FIFO in its internal inventory accounts.  At year end, it converts the...

DV LIFO: Conway Company uses FIFO in its internal inventory accounts.  At year end, it converts the FIFO results to DV LIFO. The company adopted LIFO on December 31, 2011 with a base inventory of $107,000.  The following table summarizes data available through December 31, 2014.

Inventory at year end cost Cost Index
2012 ending inventory $116,600 1.06
2013 ending inventory $128,800 1.12
2014 ending inventory $129,950 1.15

a.  What amount would Conway report as the value of inventory under DV LIFO on its 2012 balance sheet?

b.  What is the effect of the conversion to DV LIFO on 2012 COGS? Indicate below if COGS increases, decreases, or does not change as a result of the conversion from FIFO to DV LIFO and then indicate the dollar amount (if any).

c.  What amount would Conway report as the value of inventory under DV LIFO on its 2013 balance sheet?

d.  What amount would Conway report as the value of inventory under DV LIFO on its 2014 balance sheet?

will you please explain step by step thank you

Solutions

Expert Solution

Answer :

(a)

What amount would conway report a the value of inventory under DV LIFO on its 2012 balance sheet ?

2012 Inventory (DV LIFO) = $110,000

(b).

Ending inventory at base-year-prices = $116600/1.06

= $110,000

Now we can compute the real - dollar quantity increase in inventory

= ($110,000 - $107,000)

= $3,000

The next step is to value this real dollar quantity increase in inventory at year-end-prices

= $3000*1.06

= $3,180

Beginning inventory (first layer) in terms of 100 $107,000
Increase during 2012 (Second layer) in terms of 1.06 $3180
Dollar value LIFO inventory on December 31.2012 $110,180

(c). What amount would conway report as the value of inventory under DV LIFO on its 2013 balance sheet

2013 inventory (DV LIFO) $115,000

(d). What amount would conway report as the value of inventory under DV LIFO on its 2014 balance sheet ?

2014 Inventory (DV LIFO) $113,000
Date Inventory at end of year prices Price index percentage Inventory at base year prices Change from prior year
31.Dec.11 $107,000 100 $107,000 0
31.Dec.12 $116,600 106 $110,000 $3,000
31.Dec.13 $128,800 112 $115,000 ($1,600)
31.Dec.14 $129,950 115 $113,000 ($15,800)

ekkarill92 answered 2 years ago
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