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On January 1, 2018, Avondale Lumber adopted the dollar-value LIFO inventory method. The inventory value for...

On January 1, 2018, Avondale Lumber adopted the dollar-value LIFO inventory method. The inventory value for its one inventory pool on this date was $350,000. An internally generated cost index is used to convert ending inventory to base year. Year-end inventories at year-end costs and cost indexes for its one inventory pool were as follows:

Year Ended Inventory Cost Index
December 31 Year-End Costs (Relative to Base Year)
2018 $ 438,780 1.03
2019 451,540 1.07
2020 508,680 1.08
2021 548,895 1.11


Required:
Calculate inventory amounts at the end of each year. (Round intermediate calculations and final answers to the nearest whole dollars.)
  

Solutions

Expert Solution

Calculation of Inventory amount at the end of each year

1) 2018 inventory to base year prices = $438,780/1.03 = $426,000

2018 LIFO Layer = $426,000 - $350,000 = $76,000

New LIFO Layer at the end of year prices = $76,000*1.03 = $78,280

Inventory amount at the end of 2018 = $350,000+$78,280 = $428,280

2) 2019 inventory to base year prices = $451,540/1.07 = $422,000

2019 LIFO Layer liquidation = $422,000 - $426,000 = -$4,000

Inventory amount at the end of 2019 = $350,000+[($76,000-$4,000)*1.03] = $424,160

3) 2020 inventory to base year prices = $508,680/1.08 = $471,000

2020 LIFO Layer = $471,000 - $422,000 = $49,000

LIFO Layer at the end of year prices = $49,000*1.08 = $52,920

Inventory amount at the end of 2019 = $424,160+$52,920 = $477,080

4) 2021 inventory to base year prices = $548,895/1.11 = $494,500

2020 LIFO Layer = $494,500 - $471,000 = $23,500

LIFO Layer at the end of year prices = $23,500*1.11 = $26,085

Inventory amount at the end of 2019 = $477,080+$26,085 = $503,165

ekkarill92 answered 1 year ago
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