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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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Dollar-Value LIFO A company adopted the LIFO method when its inventory was $1,800. One year later its ending inventory was $2,100, and costs had increased 5% during the year.

Required:

What is the ending inventory using dollar-value LIFO? Round to the nearest dollar.

To determine

Compute the ending inventory using dollar value LIFO method.

Explanation

Dollar-value LIFO method: In this method, the valuation of inventory is calculated on the monetary value of units instead of quantity of units held. The dollar value LIFO method uses the cost indexes to convert the current cost of inventory to the base year cost.

Determine the dollar value of LIFO ending inventory:

Dollar-value LIFO ending inventory}=(Base-year ending inventory)+(Increase at current costs)=$1,800+$210 (2)=$2,010

Therefore, the ending inventory using dollar value LIFO method is $2,010.

Working note 1: Determine the costs of inventory at base year:

Given: The ending inventory is $2,100. The cost of inventory has increased by 5 % which implies that the current cost index is 105(100+(100×5100))

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