Question

In: Accounting

Retail Corp adopted the dollar-value LIFO method on 1-1-2016. Date Year-end inventory at year-end cost Cost...

Retail Corp adopted the dollar-value LIFO method on 1-1-2016.

Date

Year-end inventory at year-end cost

Cost index at date indicated

1-1-16

$2,340,000

1.00

12-31-16

$2,650,000

1.06

12-31-17

$2,680,000

1.10

Given the above information, please answer the following questions:

  1. 1A. What is the base inventory value ($)?

  2. 1B. What is the dollar-value LIFO inventory at 12-31-16?

  3. 1C. What is the dollar-value LIFO inventory at 12-31-2017?

Solutions

Expert Solution

1A. Base inventory value :

It is the value reported at end of the year. Here, it is

01-01-2016 and value is $23,40,000 / 1.00

.'. Base inventory value. => $23,40,000

Dollar value lifo inventory method :
1B. Dollar value lifo inventory at 12-31-2016.
Inventory at base year price :
=> $26,50,000 / 1.06
=> $25,00,000
Real dollar increase in inventory :
=> ($25,00,000 - $23,40,000)
=> $1,60,000
Real dollar increase in inventory at year end prices :
=> $1,60,000 x 1.06
=> $1,69,600
Begining inventory (01-01-2016) $23,40,000
( + ) Increase in 2016 $1,69,600
Dollar value inventory for 12-31-2016 $25,09,600

1C. Dollar value lifo inventory at 12-31-2017.
Inventory at base year price :
=> $26,80,000 / 1.10
=> $24,36,364
Real dollar increase in inventory :
=> ($24,36,364 - $26,50,000)
=> ( $2,13,636 )
Real dollar increase in inventory at year end prices :
=> ( $2,13,636 ) x 1.10
=> ( $2,35,000 )
Begining inventory (01-01-2017) $26,50,000
( + ) Increase in 2017 ( $2,35,000 )
Dollar value inventory for 12-31-2017   $24,15,000

_ _ _ x _ _ _

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