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In: Accounting
On January 1, 20X1, ABC Company’s first day of operations, the company purchased $250,000 of finished...
On January 1, 20X1, ABC Company’s first day of operations, the company purchased $250,000 of finished goods inventory. The company decided to employ the dollar-value LIFO method for reporting its inventory. The following table includes inventory information from 20X1-20X4: Date Inventory at current cost Cost index 12/31/20X1 $315,000 1.05 12/31/20X2 $378,000 1.08 12/31/20X3 $352,000 1.10 12/31/20X4 $421,200 1.17 2.5 points each A. Determine the appropriate inventory valuation at 12/31/X1. (2.5 points) B. Determine the appropriate inventory valuation at 12/31/X2. (2.5 points) C. Determine the appropriate inventory valuation at 12/31/X3. (2.5 points) D. Determine the appropriate inventory valuation at 12/31/X4. (2.5 points)
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Expert Solution
| DATE | Ending Inventory (Current year prices) | Cost Index | Ending Inventory (Base year prices)= Inventory at current cost/Cost index | Change from previous year | |
| 31/12/2010 | 250000 | 1 | 250000.00 | ||
| 31/12/2011 | 315000 | 1.05 | 300000.00 | 50000.00 | |
| 31/12/2012 | 378000 | 1.08 | 350000.00 | 50000.00 | |
| 31/12/2013 | 352000 | 1.1 | 320000.00 | -30000.00 | |
| 31/12/2014 | 421200 | 1.17 | 360000.00 | 40000.00 | |
| DATE | Ending Inventory at Base Year Prices | Layers (Base Year Prices) | Cost Index | Ending Inventory at LIFO Cost | Appropriate Inventory |
| 31/12/2010 | 250000 | 250000 | 1 | 250000 | 250000 |
| 31/12/2011 | 300000 | 250000 | 1 | 250000 | |
| 50000(300000-250000) | 1.05 | 52500 | 302500 | ||
| 31/12/2012 | 350000 | 250000 | 1 | 250000 | |
| 50000(300000-250000) | 1.05 | 52500 | |||
| 50000(350000-300000) | 1.08 | 54000 | 356500 | ||
| 31/12/2013 | 320000 | 250000 | 1 | 250000 | |
| 50000(300000-250000) | 1.05 | 52500 | |||
| 20000(50000-30000loss) | 1.08 | 21600 | 324100 | ||
| 31/12/2014 | 360000 | 250000 | 1 | 250000 | |
| 50000(300000-250000) | 1.05 | 52500 | |||
| 20000(50000-30000loss) | 1.08 | 21600 | |||
| 40000(360000-320000) | 1.17 | 46800 | 370900 |
We have taken the opening Inventory purchased in 20X1 as closing inventory on 31/10/20X0.
In place of x in years we have taken 1 i.e. 20X1 is 2011 and so on.
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