Question

Opera Corp. uses dollar-value LIFO method of computing its inventory cost. Data for the past three years is as follows: Year ended Inventory at Price December 31. End-of-year Prices Index 2019 $650,000 1 .00 2020 1,260,000 1 .05 2021 1,350,250 1 .10 What is the 2020 inventory balance using dollar-value LIFO

Answer 1

Answer:

$1,257,750

Explanation:

Year ended            inventory at price              end-of-year prices index

                               December 31

2016                           $650,000                           1.00

2017                         $1,260,000                           1.05

2018                         $1,350,250                            1.10

2016       $650,000 / 1 =           $650,000

2017        $1,260,000 / 1.05 = $1,200,000

               $1,200,000 - $650,000 = $550,000 x 1.05 = $577,500    

                                                                                       + $650,000

                                                                                        $1,227,500

2018        $1,350,250 / 1.05 = $1,227,500

               $1,227,500 - $650,000 - $550,000 = $27,500 x 1.1 = $30,250    

                                                                                                 + $1,227,500

                                                                                                    $1,257,750