Question

RF Company had January 1 inventory of $300,000 when it adopted dollar-value LIFO. During the year, purchases were $1,800,000 and sales were $3,000,000. December 31 inventory at year-end prices was $430,080, and the price index was 112. What was RF Company's ending inventory?
a. $300,000.
b. $384,000.
c. $394,080.
d. $430,080.

Answer 1

Answer:

c. $394,080.

Explanation:

We have

January inventory = $300,000

December inventory = $ 430,080

Price index = 1.12

Let us use this method to evaluate the RF company's unending inventory.

Firstly is calculated as

December 31st divided by the price index.

= $430,080÷1.12

= $384,000

Subtracting the sales of the whole year from the inventory. We have

= $384,000 - $300,000

= =$84,000

Finally , calculating the RF Company's ending inventory as

= $300,000+$84,000×1.12

= $300,000+$94,080

=$394,080

$394,080 is the RF Company's ending inventory

Answer 2

Answer:

To properly calculate this question, the price index was not 112 but 1.12. Using the correct price index, the answer is C. $394,080

Explanation:

To calculate the ending inventory of RF Company, we have to first calculate the inventory at year-end (December 31st) divided by the price index.

$=\frac{430,080}{1.12} = 384,000$

Second, we subtract the sales of the year from the inventory at year-end.

$384000 - 300000 = 84000$

To calculate RF Company's ending inventory, we have;

$300000 + 84000 * 1.12 = 394080$

Therefore, RF Company's ending inventory is $394,080