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Intermediate Accounting: Reporting...

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

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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An evaluation of Bryce’s Bookstore’s inventory was performed in Year 2. It produced the following results:

Sample of ending inventory at current-year costs = $75,000

Sample of ending inventory at previous-year costs = $69,000

The cost index in Year 1 was 105. Using the link-chain method, compute Bryce’s cost index for Year 2.

To determine

Compute the cost index of Company B for Year 2, using the link-chain method.

Explanation

Cost index:

Cost index refer to the index which relates the inventory cost of current year with the base year.

Link-chain method:

Under the link-chain method of cost index, a sample of the current year ending inventory costs and previous year’s cost.

Compute the cost index of Company B:

Cost Index = Ending inventory at Current year costEnding inventory at Previous year cost

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