Question

In: Accounting

Gross Corporation adopted the dollar-value LIFO method of inventory valuation on December 31, 2017. Its inventory...

Gross Corporation adopted the dollar-value LIFO method of inventory valuation on December 31, 2017. Its inventory at that date was $440,000 and the relevant price index was 100. Information regarding inventory for subsequent years is as follows:

                                             Inventory at                 Current

            Date                       Current Prices             Price Index(%)

December 31, 2018                  $513,600                       107

December 31, 2019                   580,000                       125

December 31, 2020                   650,000                       130

     

   4- What is the cost of the ending inventory at December 31, 2018 under dollar-value LIFO?

a.   $480,000.

b.   $513,600.

c.   $482,800.

d.   $470,800.

e. None of the above

    5- What is the cost of the ending inventory at December 31, 2019 under dollar-value LIFO?

a.   $464,000.

b.   $462,800.

c.   $480,000.

d.   $465,680.

             e. None of the above

Solutions

Expert Solution

  • Working

Inventory Layers Converted to Base Year Cost

Inventory Layers Converted to Cost

Ending Inventory DVL Cost

Date

Inventory at Year end cost

Year End Cost Index

Inventory Layers at Base Year Cost

Inventory Layers at Base Year Cost

Year End Cost Index

=

Inventory Layers Converted to Cost

01-Jan-18

$440,000

/

1.00

=

$440,000

Base

$440,000

x

1.00

=

$440,000

$440,000

31-Dec-18

$513,600

/

1.07

=

$480,000

Base

$440,000

x

1.00

=

$440,000

2018

$40,000

x

1.07

=

$42,800

$482,800

31-Dec-19

$580,000

/

1.25

=

$464,000

Base

$440,000

x

1.00

=

$440,000

2018

$24,000

x

1.07

=

$25,680

$465,680

  • Requirements

[4]: Cost of ending inventory 31 Dec 2018 = $ 482,800 [Option ‘C’]
[5]: Cost of ending inventory 31 Dec 2019 = $ 465,680 [Option ‘D’]


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