Question

help with 15

15. Udon Inc. adopted dollar-value LIFO (DVL) as of January 1, 2018, when it had an inventory of $710,000. Its inventory as of December 31, 2018, was $904,800 at year-end costs and the cost index was 1.20. What was DVL inventory on December 31, 2018? A. $754,000. B. $852,000. C. $904,800. D. $762,800. 16. Molly Corporation obtained a $45,000 note receivable from a customer on June 30, 2018. The note, along with interest at 4%, is due on June 30, 2019. On September 30, 2018, Molly discounted the note at Cloverdale bank. The bank's discount rate is 8%. What amount of cash did Molly receive from Cloverdale Bank? 05.000 A. $41,400. B. $43,992. 45 -9

Answer 1

Calculation of value of closing inventory under Dollar value LIFO method,

1. The 1st step is to calculate the value of inventory as on 31, December 2018 at base price, that is calculated as 904,800/1.2 = 754,000
2. Then determine the difference between inventory as on January 1,2018 and base price inventory, which is 710,000 - 754,000 = 44,000.
3. Multiply this difference with the cost index, that is 44,000 * 1.2 = 52,800.
4. Add the inventory as on January 1, 2018 with the above step 3, which is 710,000 + 52,800 = 762,800.

This calculation is based on the fact that, the increment in inventory should only be valued at inflated prices and the balance to be shown at base prices only.