Question

Pharoah Company adopted the dollar-value LIFO method on January 1, 2017 (using internal price indexes and multiple pools). The following data are available for inventory pool A for the 2 years following adoption of LIFO.

(14) Pharoah Company adopted the dollar-value LIFO method on January 1, 2017 (using internal price indexes and multiple pools). The following data are available for inventory pool A for the 2 years following adoption of LIFO. Inventory 1/1/17 12/31/17 12/31/18 At Base-Year Cost $185,300 247,800 272,800 At Current-Year Cost $185,300 272,580 305,536 Computing an internal price index and using the dollar-value LIFO method, at what amount should the inventory be reported at December 31, 2018? December 31, 2018 Price Index Dollar-value LIFO inventory

Answer 1

Answer :

1) calculation of price index on 31/Dec/2018 :

Year	inventory prices at end of year	inventory prices at base year	price index (Inventory price at end of year ÷ inventory prices at base year)	Change in inventory from prior years
2016	$1,85,300	$1,85,300	100	$0
2017	$2,72,580	$2,47,800	110	$24,780
2018	$3,05,536	$2,72,800	112	$32,736

2)calculation of dollar value LIFO inventory on 31/Dec/2018 :

Particularls	Amount
$1,85,300 × 1.0 + $27,780 × 1.1 + $32,736 × 1.12 = $1,85,300 + $27,258 + $36,664.32 = $2,49222	$2,49,222