Coronado 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.
Date |
Ending Inventory |
Price Index |
||||
Dec. 31, 2013 |
$84,600 |
100 |
||||
Dec. 31, 2014 |
130,186 |
119 |
||||
Dec. 31, 2015 |
125,256 |
136 |
||||
Dec. 31, 2016 |
148,029 |
147 |
||||
Dec. 31, 2017 |
168,112 |
158 |
||||
Dec. 31, 2018 |
199,916 |
164 |
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 Richardson Company for 2013
through 2018 using dollar-value LIFO.
Calculate ending inventory (Dollar value LIFO ) | ||||||
1) Calculate value of ending inventory of current year at base year prices : | ||||||
Value of current year ending inventory at current prices / price index of current year | ||||||
2013 | 84600/1.00 | $ 84,600.00 | ||||
2014 | 130186/1.19 | $ 109,400.00 | ||||
2015 | 125256/1.36 | $ 92,100.00 | ||||
2016 | 148029/1.47 | $ 100,700.00 | ||||
2017 | 168112/1.58 | $ 106,400.00 | ||||
2018 | 199916/1.64 | $ 121,900.00 | ||||
2) Calculate Quantity increase / decrease in real dollar times : | ||||||
2013 | 84600-84600 | $ - | ||||
2014 | 109400-84600 | $ 24,800.00 | ||||
2015 | 92100-109400 | $ (17,300.00) | ||||
2016 | 100700-92100 | $ 8,600.00 | ||||
2017 | 106400-100700 | $ 5,700.00 | ||||
2018 | 121900-106400 | $ 15,500.00 | ||||
3) Convert real dollar quantity increase/decrease at current year prices : | ||||||
Real dollar quantity increase in inventory *current year price index | ||||||
[a] | [b] | [c] | [c]*[d] | |||
2013 | ||||||
2014 | 24800 | 1.19 | 29512 | |||
2015 | -17300 | 1.19 | -20587 | |||
2016 | 8600 | 1.47 | 12642 | |||
2017 | 5700 | 1.58 | 9006 | |||
2018 | 15500 | 1.64 | 25420 | |||
In 2015 price index of 2013 has been used as no layer is formed because ending invenntory of 2015 at base price is less than beginning inventory at base price. | ||||||
4) Calculate the ending inventory : | ||||||
Year ended | Ending inventory | Price index | Ending inventory at base year | Quantity increase in real dollars from prior years | Real dollar increase at current prices | Inventory under dollar value LIFO method |
[1] | [2] | [3] | [4] | |||
2013 | 84600 | 100 | 84600 | $ - | 0 | 84600 |
2014 | 130186 | 119 | 109400 | $ 24,800.00 | 29512 | 114112 |
2015 | 125256 | 136 | 92100 | $ (17,300.00) | -20587 | 93525 |
2016 | 148029 | 147 | 100700 | $ 8,600.00 | 12642 | 106167 |
2017 | 168112 | 158 | 106400 | $ 5,700.00 | 9006 | 115173 |
2018 | 199916 | 164 | 121900 | $ 15,500.00 | 25420 | 140593 |
Inventory under dollar value LIFO method | $140,593 |
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