Question

On January 1, 2021, Avondale Lumber adopted the dollar-value LIFO inventory method. The inventory value for its one inventory pool on this date was $290,000. An internally generated cost index is used to convert ending inventory to base year. Year-end inventories at year-end costs and cost indexes for its one inventory pool were as follows:

Year Ended	Inventory			Cost Index
December 31	Year-End Costs			(Relative to Base Year)
2021	$	372,300		1.02
2022		383,720		1.06
2023		435,490		1.07
2024		466,950		1.10

Required:
Calculate inventory amounts at the end of each year. (Round intermediate calculations and final answers to the nearest whole dollars.)
  

Answer 1

Solution:

Date	Inventory at end of year prices	Price index (Percentage)	Inventory at base year prices	Change from Prior Years
01-Jan-21	$2,90,000	1.00	$2,90,000	$0
31-Dec-21	$3,72,300	1.02	$3,65,000	$75,000
31-Dec-22	$3,83,720	1.06	$3,62,000	-$3,000
31-Dec-23	$4,35,490	1.07	$4,07,000	$45,000
31-Dec-24	$4,66,950	1.10	$4,24,500	$17,500

Computation of dollar value inventory - LIFO
Particulars	Amount
December 31, 2021:
$290000*1	$2,90,000
$75000*1.02	$76,500
Inventory at Dec 31, 2021	$3,66,500
December 31, 2022:
$290000*1	$2,90,000
($75000- $3000)*1.02	$73,440
Inventory at Dec 31, 2022	$3,63,440
December 31, 2023:
$290000*1	$2,90,000
($75000- $3000)*1.02	$73,440
$45000*1.07	$48,150
Inventory at Dec 31, 2023	$4,11,590
December 31, 2024:
$290000*1	$2,90,000
($75000- $3000)*1.02	$73,440
$45000*1.07	$48,150
$17500*1.10	$19,250
Inventory at Dec 31, 2024	$4,30,840