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On January 1, 2020, ECT Co. adopted the dollar-value LIFO method for its one inventory pool....

On January 1, 2020, ECT Co. adopted the dollar-value LIFO method for its one inventory pool. The pool's value on this date was $600 million. The 2020 and 2021 ending inventory valued at year-end costs were $702 million and $840 million, respectively. The appropriate cost indexes are 1.08 for 2020 and 1.20 for 2021.

Required:

Calculate the inventory balance that ECT Co. would report on its year-end balance sheets for 2020 and 2021, using the dollar-value LIFO method and submit using the DVL template.

Solutions

Expert Solution

Calculation:

year Base price (without inflation) Ending Inventory (without inflation) Ending Inventory (with inflation tobe repoted )
1 jan 2015 600 - -
31Dec 2015 650           [702*1 /1.08] 600 - Beginning 600
50 -   out of this year purchase 50 *1.08 = 54
Total inventory to be reported under Dollar LIFO 654
31Dec 2016 700      [840 *1/1.0] 600 - Beginning 2015 600
50 - 2015 purchase 50*1.08 = 54
50 - 2016 purchase 50 *1.20 = 60
Total inventory to be reported under Dollar LIFO 714

ekkarill92 answered 2 years ago
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