Question

Exercise 8-23 The following information relates to the James Smith Company. Ending Inventory (End-of-Year Prices) Price Index Date December 31, 2016 75,800 100 December 31, 2017 December 31, 2018 December 31, 2019 95,700 110 103,944 118,314 122 126 December 31, 2020 109,254 131 Use the dollar-value LIFO method to compute the ending inventory for Smith Company for 2016 through 2020. Ending Inventory 2016 $ 75,800 2017 $ 2018 $ 2019 $ 2020 $

Answer 1

James smith company

2016 - 75800

2017

Ending Inventory at Base year prices = 95700/1.1 = = 87000

Real dollar quantity increase in inventory = 87000 - 75800 = 11200

Dollar value LIFO inventory :- $ 75800 * 1 + 11200 * 1.1

$ 88120

2018

Ending Inventory at Base year prices = 103944/1.22 = 85200

Real dollar quantity increase in inventory = 85200 - 87000 = 1800 ( LIFO liquidation )

Dollar value LIFO inventory :-

75800 * 1 = 75800

1800 * 1.1 = 1980

Total = 77780

2019

Ending Inventory at Base year prices = 118314/1.26 = 93900

Real dollar quantity increase in inventory =93900 - 85200 = 8700

Dollar value LIFO inventory :-

75800 * 1 = 75800

1800 * 1.1 = 1980

8700 * 1.26 = 10962

Total = 88742

2020

Ending Inventory at Base year prices = 109254/1.31 = 83400

Real dollar quantity increase in inventory = 83400 - 93900 = 10500 ( LIFO liquidation )

Dollar value LIFO inventory :-

75800 * 1 = 75800

10500 * 1.1 = 11550

Total = 87350