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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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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:

Chapter 7, Problem 11P, Olson Company adopted the dollar-value LIFO method for inventory valuation at the beginning of 2015.

Required:

  1. 1. Calculate the dollar-value LIFO inventory at the end of each year.
  2. 2. Prepare the appropriate disclosures for the 2021 annual report if Olson uses current cost internally and LIFO for financial reporting.

1.

To determine

Using the dollar value LIFO method compute the ending inventory for all the years.

Explanation

Last-in-First-Out (LIFO): In this method, items purchased recently are sold first. So, the value of the ending inventory consists the initial cost for the remaining unsold items.

Table (1)

DateIncrease at relevant current costsEnding inventory at LIFOLIFO layers
2018- $ 50,000  50,000 ($50,000 at 100)
2018$ 6,000 $ 56,000 50,000 ($50,000 at 100)
6,000   ($5,556 at 108...

2.

To determine

Prepare the annual report disclosure for Company O using the LIFO.

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