Question

MULTIPLE CHOICE. Choose the one alternative that best answers the question. 1) Dollar-value LIFO: A) Only is allowed for internal reporting purposes. B) Increases the recordkeeping costs of LIFO. C) Starts with ending inventory measured at current costs and re-creates LIFO layers for measuring inventory costs. D) None of these answer choices are correct. 2) Robertson Corporation's inventory balance was $22,000 at the beginning of the year and $20,000 at the end The inventory turnover ratio for the year was 6.0 and the gross profit ratio 40%. What were net sales for the year? (2 points) A) $126,000. B) $120,000 C) $200,000 D) $210,000. 3) Bond Company adopted the dollar-value LIFO inventory method on January 1, 2018. In applying the LIFO method, Bond uses internal cost indexes and the multiple-pools approach. The following data were available for Inventory Pool No. 3 for the two years following the adoption of LIFO: Year Ending Inventory At Base At Current Cost Year Cost $ 300,000 $ 300,000 345,600 320,000 420,000 350.000 1/1/2018 12/31/2018 12/31/2019 Cost Index 1.00 1.08 1.20 Under the dollar-value LIFO method, the inventory at December 31, 2019, should be (show your work or you will lose points) (3 points) A) $350,000 B) $351,600. C) $357,600 D) None of these answer choices are correct. Page 1

Answer 1

1) C) starts with ending inventory measured at current costs and recreates LIFO layers for measuring inventory costs.

Simply in LIFO, latest inventory is sold first.

2) A) $126,000

Inventory turnover ratio = net sales/average inventory

6 = net sales/{(22000 + 20000)/2}

6 = net sales/21000

So the net sales = 21000 * 6 = $126,000

3) C) $357,600

  Base layer: $300,000 × 1.00 =$300,000

2018 layer: $20,000 × 1.08 =   21,600

2019 layer: $30,000 × 1.2 = 36000

Total = $357,600