Question

Sheridan Company cans a variety of vegetable-type soups. Recently, the company decided to value its inventories using dollar-value LIFO pools. The clerk who accounts for inventories does not understand how to value the inventory pools using this new method, so, as a private consultant, you have been asked to teach him how this new method works.

He has provided you with the following information about purchases made over a 6-year period.

Price Index Date Dec. 31, 2016 Dec. 31, 2017 Dec. 31, 2018 Dec. 31, 2019 Dec. 31, 2020 Dec. 31, 2021 Ending Inventory (End-of-Year Prices) $75,800 121,184 119,296 142,197 162,900 193,130 100 112 128 139 150 155 You have already explained to him how this inventory method is maintained, but he would feel better about it if you were to leave him detailed instructions explaining how these calculations are done and why he needs to put all inventories at a base-year value. Compute the ending inventory for Sheridan Company for 2016 through 2021 using dollar-value LIFO. Ending Inventory 75800 2016 2017 2018 2019 2020 2021

Answer 1

Calculate ending inventory

		Ending inventory
2016		75800
2017	121184/1.12 = 108200	75800+32400*1.12 = 112088
2018	119296/1.28 = 93200	75800+17400*1.12 = 95288
2019	142197/1.39 = 102300	95288+9100*1.39 = 107937
2020	162900/1.50 = 108600	107937+6300*1.5 = 117387
2021	193130/1.55 = 124600	117387+16000*1.55 = 142187