The dollar-value LIFO method was adopted by King Corp. on January 1, 2012. Its i
ID: 2355194 • Letter: T
Question
The dollar-value LIFO method was adopted by King Corp. on January 1, 2012. Its inventory on that date was $160,000. On December 31, 2012 the inventory at prices existing on that date amounted to $151,200. The price level at January 1, 2012 was 112. Instructions: a)Compute the amount of the inventory at December 31, 2012, under the dollar-value LIFO method. b)On December 31, 2013, the inventory at prices existing on that date was $195,500, and the price level was 115. Compute the inventory on that date under the dollar-value LIFO method.Explanation / Answer
a)Compute the amount of the inventory at December 31, 2012, under the dollar-value LIFO method.
Answer: 135,000
Calculation: 151,200/1.12 = 135,000
b)On December 31, 2013, the inventory at prices existing on that date was $195,500, and the price level was 115. Compute the inventory on that date under the dollar-value LIFO method.
Answer: 175,250
Calculation: 195,500/1.15 = 170,000. 135,000 at base year = 135,000. 35,000 at 2013 level is 35,000*1.15 = 40,250. Total = 135,000 + 42,250 = 175,250
chart:
date
inventory at base year cost
inventory layers
year of layer
inventory at added year cost
inventory at dollar vaue lifo
1/1/2012
160,000
160,000
base year
160,000
160,000
12/31/2012
135,000
135,000
base year
135,000
135,000
12/31/2013
170,000
135,000
base year
135,000
35,000
2013
40,250
175,250
date
inventory at base year cost
inventory layers
year of layer
inventory at added year cost
inventory at dollar vaue lifo
1/1/2012
160,000
160,000
base year
160,000
160,000
12/31/2012
135,000
135,000
base year
135,000
135,000
12/31/2013
170,000
135,000
base year
135,000
35,000
2013
40,250
175,250
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