Question

On January 1, 2016, Badger Inc. adopted the dollar-value LIFO method. The inventory cost on this date was $114,000. The 2016 ending inventory, valued at year-end costs, was $165,000. The relative cost index for this inventory in 2016 was 1.20.

  

Suppose that Badger's 2017 ending inventory, valued at year-end costs, was $176,400 and that the relative cost index for this inventory in 2017 was 1.26. In determining the inventory balance should Badger report in its 12/31/17 balance sheet:

Answer 1

Solution:

Computation of inventory at base year prices and change from prior year
Year	Inventory at end of year prices	Price index	Inventory at base year prices	Change from Prior Years
2015	$114,000.00	1.00	$114,000.00	$0.00
2016	$165,000.00	1.20	$137,500.00	$23,500.00
2017	$176,400.00	1.26	$140,000.00	$2,500.00

Computation of dollar value inventory - LIFO
Particulars	Amount
December 31, 2017:
$114,000*$1	$114,000
$23,500*$1.20	$28,200
$2,500*1.26	$3,150
Inventory at Dec 31, 2017	$145,350