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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.

ekkarill92 answered 1 year ago
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