Problem #5 (9 %) Dollar Value LIFO Archer Company manufactures one product. On D
ID: 2588341 • Letter: P
Question
Problem #5 (9 %) Dollar Value LIFO Archer Company manufactures one product. On December 31, 2013, Archer adopted the dollar- value LIFO inventory method. The inventory on that date using the dollar-value LIFO invent method was S450,000. Inventory data are as follows: ory Year 2014 2015 2016 Inventory at year-end prices S630,000 920,000 950,000 Price index (base year 2009) 1.05 1.15 1.25 Instructions Compute the inventory at December 31, 2014. 2015, and 2016 using the dollar-value LIFO method for each year, and note any years in which there was LIFO liquidation (circle or asterisk).Explanation / Answer
Year
Inventory at end of year prices
Price Index
Inventory at base year prices
Change from prior year
2013
450000
1.00
450000
0
2014
630000
1.05
630000*1/1.05 = 600000
150000
2015
920000
1.15
920000*1/1.15 = 800000
200000
2016
950000
1.25
950000*1/1.25 = 760000
(40000)
Computation of dollar value inventory:
2013:
450000 @ 1.00 = 450000
2014:
450000 @ 1.00 = 450000
150000 @ 1.05 = 157500
Total = 607500
2015:
450000 @ 1.00 = 450000
150000 @ 1.05 = 157500
200000 @ 1.15 = 230000
Total = 837500
2016:
450000 @ 1.00 = 450000
150000 @ 1.05 = 157500
160000 @ 1.15 = 184000
Total = 791500
Year
Inventory at end of year prices
Price Index
Inventory at base year prices
Change from prior year
2013
450000
1.00
450000
0
2014
630000
1.05
630000*1/1.05 = 600000
150000
2015
920000
1.15
920000*1/1.15 = 800000
200000
2016
950000
1.25
950000*1/1.25 = 760000
(40000)
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