Brief Exercise 8-9
Headland, Inc. uses the dollar-value LIFO method of computing
its inventory. Data for the past 3 years follow.
Year Ended |
Inventory at |
Price |
||
2016 | $19,500 | 100 | ||
2017 | 21,924 | 108 | ||
2018 | 25,650 | 114 |
Compute the value of the 2017 and 2018 inventories using the
dollar-value LIFO method.
2017 | 2018 | |||
Inventory under LIFO | $ | $ |
Year Ended December 31 |
Inventory at Current Year Cost |
Price Index |
Year end Inventory at its base price |
Change in Real value of Inventory (increase) |
2016 |
$19,500 |
100 |
$19,500 |
Nil |
2017 |
$21,924 |
108 |
$20,300 |
$800 |
2018 |
$25,650 |
114 |
$22,500 |
$2,200 |
Calculation of Inventory for the year ended 2017 and 2018 using Dollar Value Inventory Method |
||
2017 Inventory at its base price |
$20,300/1.08 |
$20,300 |
2016 Inventory at its base price |
$19,500/1.00 |
$19,500 |
Therefore, Increase in Inventory |
$20,300 - $19,500 |
$800 |
Inventory of 2017 under LIFO Method |
First Layer : $19,500 x 1.00 = $19,500 Second Layer : $800 x 1.08 = $864 Total = $20,364 |
$20,364 |
2018 Inventory at its base price |
$25,650/1.14 |
$22,500 |
2017 Inventory at its base price |
$21,924/1.08 |
$20,300 |
Therefore, Increase in Inventory |
$22,500 - $20,300 |
$2,200 |
Inventory of 2018 under LIFO Method |
First Layer : $19,500 x 1.00 = $19,500 Second Layer : $800 x 1.08 = $864 Third Layer : $2,200 x 1.14 = $2,508 Total = $22,872 |
$22,872 |
Brief Exercise 8-9 Headland, Inc. uses the dollar-value LIFO method of computing its inventory. Data for the past 3 year...
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