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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

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’]

ekkarill92 answered 2 years ago

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