The dollar-value LIFO method was adopted by Enya Corp. on January 1, 2014. Its i

Question

The dollar-value LIFO method was adopted by Enya Corp. on January 1, 2014. Its inventory on that date was $173,560. On December 31, 2014, the inventory at prices existing on that date amounted to $160,160. The price level at January 1, 2014, was 100, and the price level at December 31, 2014, was 112.

1.Compute the amount of the inventory at December 31, 2014, under the dollar-value LIFO method.

2.On December 31, 2015, the inventory at prices existing on that date was $196,880, and the price level was 115. Compute the inventory on that date under the dollar-value LIFO method.

Explanation / Answer

Formula = Value on closing date X Price index of opening / price index of closing

1) Inventory 31.12.2014 = $ 160,160 X 100 / 112 = $ 143,000

2) Inventory 31.12.2015 = $ 143,000 + $ 50,050 = $ 193,050

Working

Inventory 31.12.2015 = $ 196,880 X 112 / 115 = $ 191,744

As inventory on 31.12.2014 was 143,000 only

So difference is of current year 191,744 - 143,000 = 48,744

Revalue it to current year index = 48,744 X 115 /112 = 50,050

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