Problem 4 PLEASE COMPLETE YOUR ANSWERS IN THE TABLES BELOW OR FOLLOW THE TABLES

Question

Problem 4

PLEASE COMPLETE YOUR ANSWERS IN THE TABLES BELOW OR FOLLOW THE TABLES TEMPLATE

Frederick Company adopted the dollar-value LIFO method on January 1, 2015 (using internal price indexes and multiple pools). The following data are available for inventory pool A for the 2 years following adoption of LIFO.

At Base-         At Current-    Price

Inventory                    Year Cost       Year Cost       Index

1/1/15                          $100,000         $100,000         100

12/31/15                      120,000         126,000         105

12/31/16                      128,000         143,360         112

Using the dollar-value LIFO method, at what amount should the inventory be reported at December 31, 2016?

Problem 4

Computation of price indexes:

12/31/15

12/31/16

            Dollar-value LIFO inventory 12/31/15:

Dollar-value LIFO inventory

            Dollar-value LIFO inventory 12/31/16:

Dollar-value LIFO inventory

12/31/15

Explanation / Answer

Computation of Price Index :-

Dollar Value LIFO Inventory :-

On 31/12/2015 = ($100000*1) + ($20000*1.05) = $100000 + $21000 = $121000

On 31/12/2015 = ($100000*1) + ($20000*1.05) + ($8000*1.12) = $100000 + $21000 + $8960 = $129960

Date Current Year Cost Price Index Base year Price Change in Inventory 01/01/2015 $100000 100 $100000 - 31/12/2015 $126000 105 $120000 $20000 31/12/2016 $143360 112 $128000 $8000

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