Question

Olson Company adopted the dollar-value LIFO method for inventory valuation at the beginning of 2015. The following information about the inventory at the end of each year is available from Olson's records:

Year	Current Costs	Index
2014	$50,000	100
2015	60,000	108
2016	70,000	115
2017	73,000	125
2018	78,000	135

Required:

1. Calculate the dollar-value LIFO inventory at the end of each year. Do not round your intermediate calculations. Round final answers to the nearest dollar.

	2015	2016	2017	2018
Ending Inventory at LIFO	$	$	$	$ 2. Prepare the appropriate disclosures for the 2018 annual report if Olson uses current cost internally and LIFO for financial reporting. Round final answers to the nearest dollar. 2018 2017 Inventory at current cost $ $ Less: LIFO reserve Inventory at LIFO $ $

Answer 1

Solution 1:

Computation of inventory at base year prices and change from prior year - Olson Company
Year	Inventory at end of year prices	Price index	Inventory at base year prices	Change from Prior Years
2014	$50,000.00	100	$50,000	$0
2015	$60,000.00	108	$55,556	$5,556
2016	$70,000.00	115	$60,870	$5,314
2017	$73,000.00	125	$58,400	-$2,470
2018	$78,000.00	135	$57,778	-$622

Computation of dollar value inventory - LIFO
Particulars	Amount
December 31, 2014:
$50,000*1	$50,000
December 31, 2015:
$50,000*1	$50,000
$5,556*1.08	$6,000
Inventory at Dec 31, 2015	$56,000
December 31, 2016:
$50,000*1	$50,000
$5,556*1.08	$6,000
$5,314*1.15	$6,111
Inventory at Dec 31, 2016	$62,112
December 31, 2017:
$50,000*1	$50,000
$5,556*1.08	$6,000
$2,844*1.15	$3,271
Inventory at Dec 31, 2017	$59,271
December 31, 2018:
$50,000*1	$50,000
$5,556*1.08	$6,000
$2,222*1.15	$2,555
Inventory at Dec 31, 2018	$58,556

Solution 2:

Particulars	2018	2017
Inventory at current cost	$78,000.00	$73,000.00
Less: LIFO Reserve	$19,444.00	$13,729.00
Inventory at LIFO	$58,556.00	$59,271.00