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Social Science24. Del Bosque Co. began using dollar-value LIFO for costing its inventory two years ago. Theending inventory for the past two years in end-of-year dollars was S100,000 and S150,000 andthe year-end price indices were 1.0 and 1.2, respectively. Assuming the current İnventory at endof year prices equals $215,000 and the index for the current year is 1.25, what is the endinginventory using dollar-value LIFO?a. $177,500b. $186,400.c. $190,000.d. $188,750.
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24. Del Bosque Co. began using dollar-value LIFO for costing its inventory two years ago. The ending inventory for the past two years in end-of-year dollars was S100,000 and S150,000 and the year-end price indices were 1.0 and 1.2, respectively. Assuming the current İnventory at end of year prices equals $215,000 and the index for the current year is 1.25, what is the ending inventory using dollar-value LIFO? a. $177,500 b. $186,400. c. $190,000. d. $188,750.
Expert Answer
Step1: Calculating the value of ending inventory at base year price. We have,
Ending inventory at base year price = Ending inventory / Current year price index
Ending inventory at base year price = $ 215,000 / 1.25
Ending inventory at base year price = $ 172,000
Therefore, the ending inventory at base year price shall be $ 172,000
Step2: Calculating the value of real-dollar quantity increase in inventory. We have,
Real-dollar quantity increase in inventory = Ending inventory at base year price – Base year inventory
Real-dollar quantity increase in inventory = $ 172,000 - $ 100,000
Real-dollar quantity increase in inventory = $ 72,000
Therefore, the real-dollar quantity increase in inventory shall be $ 72,000
Step3: Calculating the value of real dollar increase in inventory at year-end-prices. We have,
Value of real dollar increase in inventory at year-end-prices = Real-dollar quantity increase in inventory x Curre...
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